Maximise tax relief for wife's income

[Mechman]

Hi there,

We are jointly assessed for tax, Im currently paying the maximum of 35% into my pension for my age.

Wife pays 200 per month, she could pay 35% also, but she's a 20% taxpayer so hasn't been doing so.

Its only recently dawning on me, I hope this is correct, that as we are jointly assessed, we could contribute more for her, and we would get the benefit, I presume at year end, when we file a tax return.

If this is correct, is the most sensible thing to do is make an additional lump sum payment to her pension company in December, for the difference between her 200 per month, and the 35% she can contribute of her salary, then file a tax return, and that would generate a refund in January? Or should it be paid by her monthly via salary deduction?

is it correct to say, looking at this calculation attached, she could pay in a further 7100 (9500 less 12 x 200 per month) and wipe out our joint 40% tax liability?

Thanks in advance.

 

[scubap]

The advice I got from my wife's pension advisor was it was not possible. We increased her pension contribution last year to test the idea and when we submitted our medical expenses etc. at year end we got the benefit of the tax Relief. I don't see why it would not be possible to make a once off payment prior to the 31st of October to avail of the relief for last year.

 

[bstop]

Paying pension contributions for your wife will result in your joint income being reduced for tax purposes. This will result in tax savings at your marginal rate. If your marginal rate is 40% you will get 40% tax relief on your wife's contributions.

 

[Mechman]

The advice I got from my wife's pension advisor was it was not possible. We increased her pension contribution last year to test the idea and when we submitted our medical expenses etc. at year end we got the benefit of the tax Relief. I don't see why it would not be possible to make a once off payment prior to the 31st of October to avail of the relief for last year.

I got the same advice, but like you, it didn’t seem to make sense.

Paying pension contributions for your wife will result in your joint income being reduced for tax purposes. This will result in tax savings at your marginal rate. If your marginal rate is 40% you will get 40% tax relief on your wife's contributions.

Thanks, that’s what I was hoping would be the case.

 

[Slim]

Any contribution on your wife's behalf will be capped at the relevant percentage limit for her age, ie a % of her salary. It doesn't really matter where the money comes from.