Money into wife's workplace pension

[pauljdh]

Am I correct in thinking that I could put 30K into my wife's pension (she's a part time worker and its a very small one) and the account be credited with 37.5K? (she's a 20% tax payer). Does the credit happen immediately or is there a process with HMRC?

Im retired so can't add anything to my own pensions, she'll retire later this year so this is our last chance to do something like this.

Pension fund is with AVIVA.

Thanks
Paul

[deckster]

pauljdh said:

Am I correct in thinking that I could put 30K into my wife's pension (she's a part time worker and its a very small one) and the account be credited with 37.5K? (she's a 20% tax payer). Does the credit happen immediately or is there a process with HMRC?

Im retired so can't add anything to my own pensions, she'll retire later this year so this is our last chance to do something like this.

Pension fund is with AVIVA.

Thanks
Paul

Has she had £37.5k of relevant taxable income this year? You need to have earned the money before you can claim tax relief on it.

[Beetnik]

As a third party you can pay up to £2,880 p.a. into her pension and she'll get the tax relief added back in. Beyond that it's a no.

[Mr Pointy]

Beetnik said:

As a third party you can pay up to £2,880 p.a. into her pension and she'll get the tax relief added back in. Beyond that it's a no.

Why does it make a difference if he is a third party? She can pay in up to the relevant taxable amount of earnings: the source of the funds isn't considered is it?

[pauljdh]

The money technically is in a joint account, its her money. It would be her potting her cash into her pension pt.

Apologies if I didn't make that clear.

[deckster]

But as above, that doesn't really matter. What is important is that she earned and paid tax on the £37.5k.

[Pando99]

Above is correct, you can only put into the pension what she has earned
I have done all ths lately with my wifes pension

[Welshbeef]

Pando99 said:

Above is correct, you can only put into the pension what she has earned
I have done all ths lately with my wifes pension

But you can go back 3 years and pay in up to £40k a year (or up to the level she has earned.


Question is though have you maxed your 40-45-62% marginal rate? If not do that first ie at least double the tax rebate

[Mogul]

You may find that it takes about a month for the tax credit to show up in the pension.

It can be quite annoying if you are trying to maximise/optimise pension contributions but your employer doesn’t actually get around to paying your March payroll pension contribution into your scheme until the new tax year, and timing issues can impact the type of top up you are considering here.

P.s. one or two SIPP providers may offer an ‘instant’ tax credit - I think Weathify may be one - but haven’t looked for a while.

I guess that they must cover the tax credit in some way, as presumably they wouldn’t actually receive it from HMRC until later along with the rest of the market.

Just keep an eye on her taxable earnings for the year and remember that her total Pension Input for the year will be made up of several components: her contributions, her employer’s contributions, any automatic tax relief actually received and added to her scheme (all amounts actually falling within the tax year) or else there’s a risk that there will be an AA charge.

Possibly an argument for deferring some of the top up to next year (if more taxable earnings will be on the cards).

[supersport]

Welshbeef said:

Pando99 said:

Above is correct, you can only put into the pension what she has earned
I have done all ths lately with my wifes pension

But you can go back 3 years and pay in up to £40k a year (or up to the level she has earned.


Question is though have you maxed your 40-45-62% marginal rate? If not do that first ie at least double the tax rebate

Even if going back you have to earned enough in the current tax year to cover all the contributions. Which is unlikely for a part timer, but you never know.

[anonymous-user]

Beetnik said:

As a third party you can pay up to £2,880 p.a. into her pension and she'll get the tax relief added back in. Beyond that it's a no.

Wrong.

[LeoSayer]

One thing to be careful of is how the contribution is made because it affects the amount of tax relief she gets.

In principle, the HMRC allows tax relief on 100% of her entire earnings but this can't be achieved from gross salary contributions because the first £12,570 within her personal allowance isn't taxed.

However, if the employer contributes via salary sacrifice then she will get NI relief as well. Further relief may be possible if the employer passes along their NI saving as well (some do, my firm doesn't).

So it may be worth contributing £12,570 via SIPP and the rest via salary sacrifice.