Tax free into wife's pension

Nimrod123

We are in our late 50s and whilst my pension scheme is well funded my wife's is nil (she has not had an income for years). I would like to put as much income into her scheme so that we can make full use of any personal tax free income she will have in retirement. We are already adding the annual tax free amount of £2800 into her scheme. Is there another way that I can add to her scheme tax efficiently. Ideally I would like to use my salary sacrifice scheme to pump tax free money into her scheme. Is this possible? I am an additional tax rate payer so heavily restricted £10,000 pa) on what I can put into a scheme through salary sacrifice anyway. Appreciate any guidance , thanks

BoGoF

You are already paying the max you can as she has no earnings. Short of her getting a job there is nothing really you can do.

Linton

You cannot decrease your tax by putting money into someone else’s pension. She cannot get a larger pension unless she had earnings from employment. In theory perhaps you could employ her possibly by a private company but HMRC would be likely to consider something dubious was going on.

More practicably, is your wife eligible for a full state pension? If not it would be highly advantageous if she paid voluntary NI. Are you using both your and her S&S ISA allowances? If one cannot contribute to a pension S&S ISAs are a good substitute.

Johnnyboy11

Are you maxing-out your own pension contributions up to the £40k Annual Allowance? There is some tax advantage in doing this, particularly for higher earners.

pensionpawn

A slight tangent however you can transfer 10% of her personal allowance to yourself.

Paul_Herring

pensionpawn wrote: »

A slight tangent however you can transfer 10% of her personal allowance to yourself.

No they can't. He has to be a 20%er (in addition to her earning below the personal allowance) to take advantage of that. The fact that he's restricted to £10k contributions himself indicates he's not.

dunstonh

We are already adding the annual tax free amount of £2800 into her scheme.

The maximum is £3600.

Dazed_and_confused

My guess is the op means (but obviously hasn't said) she is contributing the £2,880 net so popular on these boards.

Being under the Personal Allowance isn't a requirement to be eligible to successfully apply for Marriage Allowance. But the potential recipient being an additional (or higher) rate taxpayer does prevent it.

Looking at her State Pension is a good shout, seems unlikely from the op has posted that she will the full new State Pension so additional contributions may well generate a very attractive return. Providing they are paid for the correct years of course.

zagfles

Dazed_and_confused wrote: »

Looking at her State Pension is a good shout, seems unlikely from the op has posted that she will the full new State Pension so additional contributions may well generate a very attractive return. Providing they are paid for the correct years of course.

Although most of the reasons for not working (other than idleness!) are covered by NI credits, for instance caring for a child under 12 (used to be 16), caring for an aged/disabled person, claiming some disability benefits, seeking work etc. Worth getting a statement to check https://www.gov.uk/check-state-pension

Paul_Herring

Dazed_and_confused wrote: »

Being under the Personal Allowance isn't a requirement to be eligible to successfully apply for Marriage Allowance.

Really? From the link I posted:

Who can apply

You can benefit from Marriage Allowance if all the following apply:

- you’re married or in a civil partnership
- you do not pay income tax or your income is below your Personal Allowance (usually £11,850)
- your partner pays income tax at the basic rate, which usually means their income is between £11,851 and £46,350

I'm uncertain, under what common circumstance*, how the lower paid partner can earn above the personal allowance, yet not pay income tax, and still allow transfer of the personal allowance...


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* I'd not be surprised to find there's a corner case where it's entirely possible.

kidmugsy

zagfles wrote: »

Although most of the reasons for not working (other than idleness!) are covered by NI credits, for instance caring for a child under 12 (used to be 16), caring for an aged/disabled person, claiming some disability benefits, seeking work etc.

It's pretty easy to spend a lot of time caring for the old without its being classified as "caring" under the rules.