Offsetting taxable profits with Pension contributions

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    Offsetting taxable profits with Pension contributions

    Apologies if this has previously been posted, I have searched but can't find much.

    I have recently moved in with my partner and subsequently started renting out my house. I have been lucky enough to make a 5 figure pre-tax profit (most of which will be sunk into paying off my rather high mortgage) however I still face a ~£5k tax bill.

    Whilst I am happy enough to pay my fair share of tax, I would like to investigate options of offsetting some of this bill to invest in my retirement. I understand some profits can be invested into a pension account, but i cannot find much information.

    Does anyone do this? Is there a guide I could read anywhere?

    many thanks for any advice you can offer.

    If it helps, I am a higher rate tax payer.




    #2
    You can make tax efficient pension payments, but you can't use them to offset the income for your business.

    If you were operating your rental business as a company, it could make pension contributions from its income as a business expense.
    Which is possibly where the notion has arisen.
    When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
    Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

    Comment


      #3
      Hi,
      Whilst you can't offset the income from your rental, you can easily contribute from your salaried earnings.

      So if your property profit is £12500 pre tax. Then make the same contribution through PAYE to your pension. It is just a case of moving money. If your only source of income is property then not so straightforward. However from your post it sounds like you are employed.

      In addition, I would be looking to bring all earnings into lower tax bracket. This would depend on your current financial situation. How far into the 40% bracket you are etc....

      Comment

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