Ask Money: how is pension tax relief calculated?

Financial planning expert Nick Onslow of RU Group helps a reader with a financial question.

April 15, 2019

Is the tax relief on pension contributions based on earned income (salary/bonus), or is it based on total income including that from dividend and rental income? I end up paying higher-rate tax when rental income is included.
Satish Shah, by email

Nick Onslow of financial planner RU Group replies: Tax relief for contributions is based on relevant UK earnings, which include salary, bonuses and overtime.  Dividend payments, interest and rental income do not count towards this calculation. The amount of tax relief you receive will be dependent on your annual earnings and the income tax bracket in which you pay tax.

If you need help with a tax, pension or financial planning problem, please email: moneyobserver.ed@moneyobserver.com

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