Pension contribution & Property income

[audi321]

Hi all. I'm a bit out of date with this kind of thing, but to settle an arguement with a mate, could someone answer the following:

If someone has PAYE income, and this is at basic rate (i.e. say £40k) and buy to let income which pushes them into higher rate (i.e. of say £20k) so total taxable income of £60k.

They make a £10k pension contribution.

Would this pension contribution be eligible for 20%, or 40% relief on the contribution? (Ignoring the pension provider's automatic reclaim)

I say not, because buy to let income is not classed as relevant earnings? Mate says pension contributions are on total taxable income, regardless of source.

Edited by audi321 on Sunday 26th January 22:32

[thekingisdead]

Pension contributions can only be made from earned income - BTL income does not qualify.

In your scenario, the 10k contribution is made from PAYE income, BTL income then taxed at marginal rate after pension contributions.

[audi321]

So are you saying that the PAYE income is reduced accordingly and in effect (although non qualifying) £10k of BTL income which would have been taxed at 40% would come into the 20% bracket.

So in effect the pension contribution is receiving 40% relief? So we’re both right in a way?

Edited by audi321 on Thursday 30th January 17:25