High income child benefit charge and rental income calculations

[NickPrice]

Dear board members,

I hope you can help me with a query. I wonder how rental income is calculated for the purpose of establishing the 'adjusted net income'. Example:

Salary income: 40,000
Rental income: 20,000
Rental maintenance expenses: 5,000
Mortgage expenses: 10,000

Is my adjusted net income 45,000, or is it calculated differently?

[bd6759]

That is correct for 2016-17.

For 2017-18, mortgage restriction kicks in. Only 75% of the interest is deductible. Adjusted income is £47,500
For 2018-19 its 50% (Income £50,000)
For 2019-20 its 25% (Income 52,500)
By 2020-21 you cant deduct interest. (Income £55,000)

[NickPrice]

Thanks, that is clear and helpful. I wish it had been made this clear elsewhere.

Now, if I open a SIPP and put in 5K annually, I should be in the clear, I guess?

[robbob]

Now, if I open a SIPP and put in 5K annually, I should be in the clear, I guess?

Yes - that will do the job, note if its 20% tax relief added into your pot by hmrc method, then in cash terms you only need to put in 4k (4k being 80% of 5k) and there is the bonus that your year end tax liability will be reduced by another £1k - whats not to like about that plan