# AVC tax relief limited by tax paid at top rate?



## ricta (22 Sep 2008)

Hi,
    I am calculating what lump-sum AVC my wife could/should pay for 2007. She is 50+ so can put 30% of gross salary into pension, she pays 5% p.a. into a DB fund, leaving a possible 25% for AVC. This 25% amounts to €8687, giving relief @ 41% of €3560.

  I imagine this relief of €3560 would be limited by the amount of tax paid by her at the 41% rate in 2007, if so how would that be calculated. We have already done a joint tax return for 2007; in this, €16866 was taxed at 41% but it doesn't say how much of this is apportioned to my wife and how much to me.     Does it matter?  
    Her  2007 P60 shows she paid 41% on €7,753.70 for the year. My P60 shows I paid 41% on €10,714.


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## LDFerguson (23 Sep 2008)

As tax relief on pension contributions is not transferable between spouses, if her AVC contribution is €7,753.70 it will attract tax relief at 41%.  In effect, the AVC contribution reduces her gross income.  

If she makes the full 25% (€8,687) contribution, she will attract tax relief at 41% on €7,753.70 and 20% on €933.30.  As the effect of this is relief of almost 39% on the entire contribution, I'd be inclined to think it's worth it.


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## ricta (23 Sep 2008)

Thank you Liam, that's exactly the information I needed to clear my thinking.

Regards

Ricta


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