Putting BTL income into SIPP

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I think this is a straightforward question but checking just in case I'm missing something.

Somebody earning £49k per annum has a BTL which will generate £9k income net. However they don't really want to pay higher rate tax. Can they stick the whole £9k into a SIPP? And will they get 40% tax relief)?

Thanks in advance

[Panamax]

The technical answer and the practical answer are different.

No, property income doesn't count as "earnings" from which pension contributions can be made.

However, in your example the person can make £9k of pension contributions from their qualifying "earnings" which will have the effect of opening up £9k of headroom below the higher rate tax threshold. Their £9k BTL income then slots nicely into that available space.

So the practical answer is "yes".

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Panamax said:

The technical answer and the practical answer are different.

No, property income doesn't count as "earnings" from which pension contributions can be made.

However, in your example the person can make £9k of pension contributions from their qualifying "earnings" which will have the effect of opening up £9k of headroom below the higher rate tax threshold. Their £9k BTL income then slots nicely into that available space.

So the practical answer is "yes".

Cheers

I wasnt aware that property earnings couldn't be put into a pension - every day's a school day

As the qualifying earnings are all in the 20% band I assume that means they would only get 20% tax relief?

[Panamax]

Countdown said:

As the qualifying earnings are all in the 20% band I assume that means they would only get 20% tax relief?

Well yes, but they'll have already relieved the other 20% themselves and 20 + 20 = 40% tax saving from the process.

So £9k of cash paid in would be a pension contribution and taxable income reduction of £11,250

If only wanting to shelter the £9k they would make a cash contribution of £7,200

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Thanks again