Tax Query - Retiring Mid-Tax Year

Triumph13

A query for any tax experts out there.
We currently put the whole of my wife's earnings into a personal pension and therefore get tax relief on all of it even though it wasn't all taxed. I don't feel too guilty about this as I think of the contributions as coming from money I've already paid HRT on.
If we were to retire part way through a tax year - say end of Jan - then normally I'd expect her to get a tax refund of a few hundred pounds as she'd have a couple of month's worth of PA unused on her PAYE, but will this not happen if we've already put in pension contributions for her as they would look at the overall position and say she already wasn't paying any tax?
Should we wait until after she retires and has got a refund to make any pension contributions for that tax year?

Spidernick

For the year she retires, her 'Net Relevant Earnings' will be lower (i.e. not a full tax year) and so the available pension relief will be limited to this (unless earnings are under £3,600 - see below) and will also therefore be lower.


Once your wife retires, she will presumably have no 'Net Relevant Earnings' so pension relief will be limited to £2,880 (net), i.e. a gross of £3,600 (bottom of this link):


https://www.gov.uk/tax-on-your-private-pension/pension-tax-relief

Triumph13

My query isn't around how much pension contributions she can make, but about the tax she pays / reclaims
If you take a simple example of someone on £22k pa who retires half way through the tax year then 'relevant earnings' are £11k and this is max pension contribution.
If there were no pensions in the picture she would have paid £1,100 of PAYE in the first 6 months and could reclaim this as her taxable income for the year matched her PA.
But what happens if she's paid £8,800 net of pension contributions and got £2,200 of tax relief paid into the scheme? Can she still get the £1,100 as well? Does it make a difference if she makes the pension contribution after the reclaim?

zagfles

Pension contributions to a RAS scheme (eg nearly all personal pensions) don't reduce taxable earnings, so will make no difference. The effect contributions to a RAS scheme have on tax calculations is to increase the basic rate band and reduce "adjusted net income" which are only of relevance to higher earners.

It reminds me of another question I've been struggling to find the answer to but I think it needs a new thread...