Was your individual income (all wages and benefits) over £50000? - Should this include Rent

Hi,
My friend is doing his Self-Assessment.
There is a question - Was your individual income (all wages and benefits) over £50000?

When we add the individual income for this question, should we include income from buy-to-let properties?

My friend has a full-time job and his salary is £40K. The rental income from is 2 buy-to-let properties is £2000. So, he receives a total of £24K before deducting his expenses, mortgage interest etc.

So, his total income from his full-time job and 2 properties is £64K which is more than 50K.

What should be his answer for this question - if he includes the rental income (before expenses) it will be above 50K else No.
Thanks,

that is over 50k then

If his salary plus rental profit before interest is more than £50k, then the answer is yes, I would say.

Probably aimed at working out whether you have to repay child benefit.

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Thanks @Cath2.
Is it salary after tax taken- may be the amount on P60?

Gross salary before tax

How about the pension contribution which the employer deducts from the salary before the final pay, can that be deducted when we calculate Adjustable Net Income?

Also, NI which the employer deducts?
Thanks,

For the “adjusted net income”: You start with your gross salary before deductions. You need to add all rental income and income from share dividends. This is all taxable income. But you can deduct pension contributions. However, you cannot deduct NI contributions. Look at the government website

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My friend receives a GROSS salary of £40K.

From his Gross Pay

-his Employer deducts around £5000/annum as Pension Contribution
-his Employer deducts Tax of around £5000
-his Employer deducts National Insurance of around £5000

At the end his Net Income (take home) from his salary is £25K/annum.

He is also receiving around £24K as Rent before all deductions and expenses.

So, I believe his Adjustable Net Income will be £35K (40K gross-5K pension)+24K (Rent) = £59K.
Thanks

It will be the taxable rental profit ie rents received less tax deductible costs excluding interest) not the gross rent. So, profit before interest.

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Thanks @Cath2

Out of his 24K rent, he had expenses like

-Property Repairs: 5K
-Services like Gas Safety, Cleaner: 2K
-Management Fee: 1K
-Insurances + Council Tax: 2K
-Mortgage Interest: 10K

Out of the above 5 expenses, which all will he be able to deduct from the rent when he calculates child benefit tax?

Is it all the above expenses except mortgage interest? That means 5K(repairs)+2K(services)+1K(management)+2K(insurances)=10K. In that case, his rental income will be 24-10=14K.

And therefore his Adjustable Net Income will be -

35K (40K (gross)-5K(pension)) + 14K (24K-all rental expenses except mortgage interest)=49K.
Is it correct?

Many thanks

tell him to get an accountant

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Yes, but as Colin says, sounds like you/he needs an accountant because neither of you have the knowledge to do it yourselves.

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It sounds approximately correct but this is so close to the 50k limit that details matter. If the pension provider has already given tax relief at the basic rate, then your calculation about pension is correct. Otherwise, you can multiply it by 1.25 and then subtract it.
I think your friend has two options: Either go through the government website (see link above) very carefully step-by-step. Or, as Colin and Cath said, get a professional accountant.
It’s good to ask the community for help, but we can’t give reliable advice on these details.

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Thanks very much,
His employer deducts the pension to USS Pension scheme from his Gross Monthly Pay - Your quick guide to pension tax

I think, they do it by base rate, looks like basic rate as the above document says.
Thanks,

If it’s USS then it’s probably salary sacrifice, i.e. the tax relief is already included. That means that you do the simple calculation and just subtract it, but you do NOT multiply by 1.25.

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Thanks Bastian.
So, his Adjustable Net Income is less than 50K and therefore he does NOT need to pay child benefit charges.

Yes, from your description it seems that it’s just under 50k. But it’s so close that HMRC will probably look at the details.

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Surely they will have done a tax return to report the rental profit. I’ve never used the HMRC system, but I would have thought it would have worked out if child benefit repayments were due from the information entered. I know my software does.

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Is he doing his tax return online? If he’s doing his tax return online using this site File your Self Assessment tax return online - GOV.UK then the answer to all your questions are all there. IMHO, the site is very easy to understand.

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Trying not to lose child benefit?

Look at salary sacrifice regarding your work pension

Child benefit based on salary remaining after pension deducted

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