Should my wife start contributing to a pension?

MikeFloutier

Last question (hopefully), concerning validation with HMRC of allowable amount of contributions (ie for relief purposes).

Presumably as my wife is self-employed she will need to have completed a self-assessment tax return which will cover the requested level of relief.

Here my question may be straying into another forum area.

Up to now my wife has completed returns re her Chauffeuring business online. But, in the last year she has been ministering, as a lay preacher in various countries in Europe as well as the UK and has received various gift offerings for this totalling several thousand Euros.

I believe she should be including this on her tax return (presumably less related expenses). This would enable her to contribute more to her pension this year (and probably in the future).

Should I start a thread in another section?

jem16

MikeFloutier wrote: »

I believe she should be including this on her tax return (presumably less related expenses). This would enable her to contribute more to her pension this year (and probably in the future).

Should I start a thread in another section?

I believe she should be entering this on her tax return as it is income.

As to the tax relief the pension provider would automatically add on 25% even if she completed no tax return.

xylophone

http://www.hmrc.gov.uk/manuals/pommanual/paye70230.htm

"Ministers often receive fees in retirement for weddings, funerals, services and so on. This income does not amount to a trade or profession carried out on a commercial basis. It is taxable as Miscellaneous income under the Income Tax (Trading and Other Income) Act (ITTOIA) 2005 and should be coded out where possible."

Not quite the same but probably akin to this?

It would still seem to be "relevant income" for pension tax relief purposes.

http://www.rossmartin.co.uk/private-client-a-estate-planning/income-losses-claims-reliefs/1034-relevant-earnings-for-pensions-purposes

Does she need to report this as "foreign income" https://www.gov.uk/tax-foreign-income/overview so needing additional page on tax return?

With regard to expenses she might need to check with HMRC?

MikeFloutier

Many thanks!

jamesd

She also needs to know that HMRCs online self-assessment tool does not provide the pages for ministers of religion so she may be required to file a paper tax return each year or to use third party electronic filing software if she has any income covered by those pages.

Given the situation and that it appears that she will not actually have any tax to pay due to her personal allowance probably exceeding her total income it may be best for her to phone HMRC, describe her situation and seek guidance on what they desire from her. Seeking guidance in the saving tax section here first may be fruitful.

TAXATION OF MINISTERS OF RELIGION: A ROUGH GUIDE also seems to potentially be of use as background reading. Essentially, though, it seems as though she's a self-employed minister and it's just another aspect of her self-employment, as xylophone wrote

MikeFloutier

Many thanks James

MikeFloutier

Ok, well we're in the process of selling up and moving to Cornwall now, having just passed on our business and I'm just about (when our spare equity appears) to start my wife's SIPP (still not sure whether we should use Virgin or HL).

One query regarding timing of payments to the SIPP (in and out).

I understand that payments in must be done in the tax year the contribution allowance arises.

My query is: Is there a timing issue regarding Drawing out of the SIPP (apart from the proviso that the tax relief must have been added)? e.g. do you have to wait until after the end of the tax year or some such…

Many thanks as ever!

bigadaj

MikeFloutier wrote: »

Ok, well we're in the process of selling up and moving to Cornwall now, having just passed on our business and I'm just about (when our spare equity appears) to start my wife's SIPP (still not sure whether we should use Virgin or HL).

One query regarding timing of payments to the SIPP (in and out).

I understand that payments in must be done in the tax year the contribution allowance arises.

My query is: Is there a timing issue regarding Drawing out of the SIPP (apart from the proviso that the tax relief must have been added)? e.g. do you have to wait until after the end of the tax year or some such…

Many thanks as ever!

No, apart from the 25% tax free element the amount withdrawn is subject to income tax in that year though. This won't affect your wife if she is below the personal allowance but affects many people, meaning they pay tax and may well pay higher rate, if not additional in some cases.

MikeFloutier

Many thanks Bigadaj,

I'm also assuming that her full use of the new savings interest allowance of £1000 pa won't affect this.

bigadaj

MikeFloutier wrote: »

Many thanks Bigadaj,

I'm also assuming that her full use of the new savings interest allowance of £1000 pa won't affect this.

No that should be totally separate, though will she utilise this anyway if she is so far off paying tax in any case?

If this is a one off then the following shouldn't apply, but on some payments insurers actually calculate ten payment as a regular monthly payment, and so deduct tax. This can be reimbursed by claiming back from hmrc in any case but has annoyed people before on these forums.