Joint assessment for AVCs possible

S

SayWhat?

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Hello wise ones,
I hope I can get my question across properly...

I work part time and earn currently under the 40% tax threshold (this likely won't change for another 5 years). Work doesn't contribute to pension scheme but I have the option to join one and get it deducted from salary. Also have a pension from my previous work.
Partner earns significantly over the 40% threshold and has maxed out pension contributions to age limit already.
We are comfortable enough to theoretically be able to contribute the max allowable pension for both.
So far I didnt think it made much sense as i was only hitting the 20% tax.
Married and jointly assessed. I'm late 30s partner mid 40s.
If I paid AVCs at the end of the year from our savings, can we claim it jointly assessed and would we get the 40% tax benefit or is it only assessed on my income?

Thank you!
 
How much do you earn?

You won't automatically get relief, but some people have scope to switch bands and get higher relief, but it depends on your salary.
 
OK, you'd only get 20% relief.
For 2022 any income over 27,800 could get higher relief.

It could be still worth contracting to a pension though.
 
Thank you.
Yes, I'm thinking about the 20% especially allowing me to draw down the 25% tax free portion in retirement but it's not as clear as if I hit the 40%.
Would have been too good to be true if I had been able to claim it on partners income...

Thank you for the prompt and clear answers!
 
I think your question is can you claim tax relief if you contribute more than the allowable tax deductible % into your pension. Won't be allowed as the relief is calculated as a % of your respective incomes.
 
@bstop are you absolutely sure about that?
Genuine question, we're in a similar situation and my calculations are telling me something very different! It'd be great for the OP & myself if you are correct.
 
hi. I'm interested in this also. I earn about 65k a year pre 2013 public service and contributing €60 a week to avc.

my wife a sna is on 35k a year, post 2013 single pension scheme for the last 8 years. she will more than likely have to work till 66 years old.

obviously she is below 40k a year, and pays lower rate of tax. is it advisable for her to start an avc. am I correct in thinking that she would only get 20% tax relief?

we are jointly assessed for tax purposes if it matters. I'm looking for the best way for her to have a better pension. I'm thinking it may just be better for her to start a regular saver either zurich or something.

thanks
 
Dublin85 said:
obviously she is below 40k a year, and pays lower rate of tax. is it advisable for her to start an avc. am I correct in thinking that she would only get 20% tax relief?
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She can get 40% relief.
You reduce her tax band to 31k, transferring the rest of band to you. Her tax rate of 40% kicks in earlier, but you get more income at 20%.

I can explain better if needed.
 
RedOnion said:
She can get 40% relief.
You reduce her tax band to 31k, transferring the rest of band to you. Her tax rate of 40% kicks in earlier, but you get more income at 20%.

I can explain better if needed.
Click to expand...
thanks for the reply and information. of you could elaborate I'd be obliged. thanks
 
@Dublin85

You need to look at this collectively for your joint income. It can cause a bit of confusion if you treat your incomes as 'your money and mine'.

Taking 2023 tax year to start.
A single persons tax band is 40k. Because you are married, and jointly assed, you can split the total (80k) as follows:
Spouse: 31k
You: 49k - this is the maximum you can allocate to you.
The total is still 80k.

Now your spouse income is taxable at 40% for anything over 31k. So she can get 40% relief on any contributions which leave her taxable income not lower than 31k. So if income is 35k, she can get 40% relief on 4k contribution.

2022 is more beneficial, and she can still back date AVCs (until October). She can get 40% relief on anything that leaves her taxable income above 27,800, so if income was 35k, she can get relief on up to 7,200 contribution. You need to look at age related limits and any contributions already being made in calculating the maximum.

I hope this makes more sense?
 
RedOnion said:
@Dublin85

You need to look at this collectively for your joint income. It can cause a bit of confusion if you treat your incomes as 'your money and mine'.

Taking 2023 tax year to start.
A single persons tax band is 40k. Because you are married, and jointly assed, you can split the total (80k) as follows:
Spouse: 31k
You: 49k - this is the maximum you can allocate to you.
The total is still 80k.

Now your spouse income is taxable at 40% for anything over 31k. So she can get 40% relief on any contributions which leave her taxable income not lower than 31k. So if income is 35k, she can get 40% relief on 4k contribution.

2022 is more beneficial, and she can still back date AVCs (until October). She can get 40% relief on anything that leaves her taxable income above 27,800, so if income was 35k, she can get relief on up to 7,200 contribution. You need to look at age related limits and any contributions already being made in calculating the maximum.

I hope this makes more sense?
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that is brilliant information and probably the best explanation of it iv gotten. it makes perfect sense to me now. we will do exactly as u describe with her tax bands and start an avc. thanks
 
The 9000 euro transferable amount for married couples hasn't been changed for years.
This is a stealth tax operating against many married couples.
 
RedOnion said:
You're very welcome @Dublin85
I think the situation I outlined is what @bstop is doing and started to explain yesterday.
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so we set up the avc and changed the tax bands. she is at 31k and I'm at 49k. I.am just wondering if I may have jumped the gun as she is on maternity leave and will prob be taking 8 weeks unpaid leave at some point this year. I wonder did I make a mistake?
 
You can suspend or reduce the payments to the AVC for any tax years when your wife has reduced earnings. By doing this you can set the amount of the AVC to exactly match any possible amount of available 40% tax relief.
 
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