Pension Lump Sum Contribution

50_Hertz

Thank you to all who have contributed to this, its certainly given me a start.

Just to summaries, I think the bottom line is that my wife will be able to claim back the £400 that she has paid in income tax (Her pre-tax gross in 2018 - 2019 was £14K with approx £400 paid in income tax). I may be able to claim in the region of £238 from HMRC.

It's a shame that the whole £10500 of previously of taxed money that she paid into the LGPS can't be subjected to tax relief, we would have probably received in the order of £2000 back. On reflection, it might have been better to have spread this payment over a couple of years and had it deducted from salary at source, ie before tax had been paid. We live and learn.

Thanks again

Dazed_and_confused

I may be able to claim in the region of £238 from HMRC

No. You cannot claim anything. If you try to you will potentially cause chaos as far as yours and your wife's tax affairs are concerned. See numerous threads on Marriage Allowance on the Cutting Tax board.

Your wife can apply for Marriage Allowance. And as a consequence of this HMRC will automatically give you a tax credit of £238 off your 2018:19 tax liability (assuming you are not considered a higher rate payer).

It's a shame that the whole £10500 of previously of taxed money that she paid into the LGPS can't be subjected to tax relief, we would have probably received in the order of £2000 back.

No. Your wife could never have personally benefited tax wise by more than the £400 tax paid. Had she paid £10,500 into a "relief at source" pension then the pension company would have added £2,625 tax relief to her pension fund. But then she would not have been entitled to the £400 tax refund as there is no personal tax relief due to someone with your wife's level of income.

You also have to consider the potential benefits. Money going into a relief at source pension is subject to investment choices and could do brilliantly. Or terribly. No guarantees, particularly if she wanted to take income out after a stock market crash.

But from your original post it seems like she is buying guaranteed income from LGPS?

50_Hertz

Yes, that makes sense. Thank you.