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Is divorce a tax avoidance strategy?
spakkaman
Posts: 60 Forumite
I'm in a decent position to retire.
And that is what I intend in 2016 (but I might still work a bit - never say never and all that).
A motivation for me to stop working at the tender age of 58 is the fact that I have been working these past three years while drawing a FS pension of over £50k and this of course means that I choose to work knowing I am paying HMRC 40% of all that I then earn. A nice problem I know but it does feel punitive and I am discouraged by it.
I have been paying tax at 40% for many years whereas my wife has not been earning sufficient to pay any tax. So while a nice pension for me is terrific when you add in no pension from the OH we then look less well set.
So when I read about the chancellors wizard idea of allowing us to move £1000 of tax allowance from OH to me to avoid a bit of tax it occurred to me why not go the whole hog? Get divorced!
If we divorce we then get a pension sharing order and thus utilise the tax allowances better between us to avoid a wodge of taxation at the 40% rate. OK - she would pay some tax that she hasn't had to pay before but neither of us would then be in 40% territory. Its gotta be a win.
Broached the D word with Mrs and she could see the sense of avoiding this inequity of the tax system (as opposed to setting about me with a pointy knife). We are perfectly happily married but why pay tax unnecessarily if all we need to do is file for divorce and marry again in a year or two (especially now I'm not wanting to work so this would eradicate 40% tax)?? It seems a bit crazy but if it is a way of righting a wrong within the taxation system why not?
I appreciate there are issues to consider and mitigate like if one of us were to die when we are in a divorced state but I don't see these as complete spoke in wheels .
If divorce is the solution then maybe I should have done this a few years back - it's not something that has occurred to me before and I haven't read of it. If anyone has already started a thread on this then please can someone point me.
Otherwise I welcome comments from the fraternity on the legality and practicality of this route. :doh:
PS Thinking about it I could then do a small part time job and still only pay 20% tax :T
And that is what I intend in 2016 (but I might still work a bit - never say never and all that).
A motivation for me to stop working at the tender age of 58 is the fact that I have been working these past three years while drawing a FS pension of over £50k and this of course means that I choose to work knowing I am paying HMRC 40% of all that I then earn. A nice problem I know but it does feel punitive and I am discouraged by it.
I have been paying tax at 40% for many years whereas my wife has not been earning sufficient to pay any tax. So while a nice pension for me is terrific when you add in no pension from the OH we then look less well set.
So when I read about the chancellors wizard idea of allowing us to move £1000 of tax allowance from OH to me to avoid a bit of tax it occurred to me why not go the whole hog? Get divorced!
If we divorce we then get a pension sharing order and thus utilise the tax allowances better between us to avoid a wodge of taxation at the 40% rate. OK - she would pay some tax that she hasn't had to pay before but neither of us would then be in 40% territory. Its gotta be a win.
Broached the D word with Mrs and she could see the sense of avoiding this inequity of the tax system (as opposed to setting about me with a pointy knife). We are perfectly happily married but why pay tax unnecessarily if all we need to do is file for divorce and marry again in a year or two (especially now I'm not wanting to work so this would eradicate 40% tax)?? It seems a bit crazy but if it is a way of righting a wrong within the taxation system why not?
I appreciate there are issues to consider and mitigate like if one of us were to die when we are in a divorced state but I don't see these as complete spoke in wheels .
If divorce is the solution then maybe I should have done this a few years back - it's not something that has occurred to me before and I haven't read of it. If anyone has already started a thread on this then please can someone point me.
Otherwise I welcome comments from the fraternity on the legality and practicality of this route. :doh:
PS Thinking about it I could then do a small part time job and still only pay 20% tax :T
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