Can I claim back extra 20% if I pay into Wifes pension?

[Aunty Pasty]

I am a higher rate tax payer at 40% and have my own pensions. I started doing self assessment tax returns last year.
My wife is a housewife and does not have her own private pension.

We've been advised to get the wide to start up her own private pension so that when it starts paying out we can take advantage of her tax free income allowance when we retire. We're going with a Vanguard Lifestyle strategy (keeping it simple for now) and throw a lump sum in to start off.

My question is: If I contribute to my wife pension via direct debit from my funds, am I able to claim back the extra 20% that I pay in income tax? Usually the pension companies automatically claim back 20% but I was wondering about the other 20%.

Many thanks.

[anonymous-user]

No. Tax relief is only available to the pension member.

With no net relevant earnings her maximum net contribution to which tax relief will be added is £2880.

[supersport]

Why not just put into an ISA, there is no tax on the way out and as a non tax payer she put a lot more in.

If she doesn't work are you using some of her tax allowance?

[Aunty Pasty]

Rufus Stone said:

No. Tax relief is only available to the pension member.

With no net relevant earnings her maximum net contribution to which tax relief will be added is £2880.

I didn't know about that. Thanks for clarififying for me.

[pilotoscot]

She will get basic rate tax relief at that amount even with no earnings so well worth the instant 20% return!

[Aunty Pasty]

I did look into Marriage allowance but I'm over the upper earnings threshold according to the HMRC Gov website.

[supersport]

Jasey_ said:

supersport said:

If she doesn't work are you using some of her tax allowance?

AFAIK not possible if you are a higher rate tax payer.

There are ways of making it so you are not a higher rate tax payer using salary sacrifice for pension payments but it gets a little complicated.

Aunty Pasty said:

I did look into Marriage allowance but I'm over the upper earnings threshold according to the HMRC Gov website.

As I wrote that I did wonder if that was the case.

There is a very low limit with how much you can put in a pension if you don't work, ~£4K but I suppose the 20% of that is worth having, better than a kick in the teeth as they sat.

[SunsetZed]

supersport said:

There is a very low limit with how much you can put in a pension if you don't work, ~£4K but I suppose the 20% of that is worth having, better than a kick in the teeth as they sat.

It is but unless lifetime allowance / already maxing out annual contributions is an issue it would be better for the OP to put it into their pension and get the 40%

[C-J]

SunsetZed said:

It is but unless lifetime allowance / already maxing out annual contributions is an issue it would be better for the OP to put it into their pension and get the 40%

Is the optimum for overall tax efficiency for the HR taxpayer to make their own pension contributions that reduce their effective position to that of a BR (i.e. benefit from all 40% HR tax rebate possible, but no more than that) - and then put anything else available into the spouse's pension.

The latter step only gets 20% tax relief on the way in regardless of who's pot it goes into - but at least the lower earning partner probably pays less tax when drawing out.

Is that the optimum way? I guess the challenge is having enough free funds to both saturate the 40% opportunity, and then have enough to put more in to the BR spouse's pot!

...and... thinking about it... even if that latter was just a small contribution initially, if there was some cash windfall in future (lottery win, inheritance etc) could the 'unused years allowance apply' and upto £120k (3 years x £40k incl 20% tax rebate) to maximize the pension contribution opportunity?

Or is that not allowed? More than annual salary of BR taxpayer etc?