Married couple tax relief on pension AVCs - transferable or not?

What_time_is_it

Does the married couple tax relief (not sure what it's called) apply on AVC contributions that are paid from salary but NOT taxed at source?

Basically my wife if looking to contribute additional AVCs into her work pension scheme. It's a hybrid scheme with a DB element paid via salary sacrifice, and a separate DC element paid to a pensions company out of her net monthly salary. The government "tops us" these contributions with the tax she has paid. e.g. If she pays in £1,000 into her AVCs, the government adds £250 tax relief to the pot.

My question is, firstly, presumably the tax reflief only applies up to the value of the tax she pays in a given year?
And, secondly, if that is the case, can she also claim tax relief on the tax I pay from my salary? And if so, is there something she/we have to do to initiate this?

Thanks!

ewaste

My question is, firstly, presumably the tax relief only applies up to the value of the tax she pays in a given year?

Correct, the Married Couples Allowance simply increases the personal allowance of the recipient therefore they pay less tax. Although from what you've said e.g. paid from net salary then it sounds like a relief at source scheme therefore contributions will get tax relief upto Gross earnings/£40k Annual Allowance minus pension contributions.

And, secondly, if that is the case, can she also claim tax relief on the tax I pay from my salary? And if so, is there something she/we have to do to initiate this?

No, tax and pensions are personal despite the Married Couples Allowance which is a fudge.

What_time_is_it

Thanks @ewaste. I thought that the Married Couples Allowance allowed for transfer of unused taxable salary? Or does that only apply to earnings? And not pensions?

molerat

Married couples allowance simply deducts £1260 from the donors tax allowance and deducts £250 from the recipients tax bill.

Albermarle

My question is, firstly, presumably the tax reflief only applies up to the value of the tax she pays in a given year?

As a general point , the amount of tax relief you can get on pensions contributions is not directly realted to how much tax you actually pay . It is limited by your gross earnings .

So if you earn £20K , you can add £16K plus  £4K tax relief. However it is unlikely you will have actually paid £4k tax due to the personal allowance.

OldBeanz

Albermarle said:

My question is, firstly, presumably the tax reflief only applies up to the value of the tax she pays in a given year?

As a general point , the amount of tax relief you can get on pensions contributions is not directly realted to how much tax you actually pay ...

The big exception being those on low pay and low hours in a net pay arrangement. So the Chief exec contributes £40k on Salary Sacrifice so getting 40% tax relief, lower NI contributions and child benefit back but the school chef who can only work 4hr per day while her kids are at school gets no tax relief and only the latest budget has stopped her paying NI.

Albermarle

OldBeanz said:

Albermarle said:

My question is, firstly, presumably the tax reflief only applies up to the value of the tax she pays in a given year?

As a general point , the amount of tax relief you can get on pensions contributions is not directly realted to how much tax you actually pay ...

The big exception being those on low pay and low hours in a net pay arrangement. So the Chief exec contributes £40k on Salary Sacrifice so getting 40% tax relief, lower NI contributions and child benefit back but the school chef who can only work 4hr per day while her kids are at school gets no tax relief and only the latest budget has stopped her paying NI.

I think there has been a solution proposed for this issue? but it will not be implemented for a while .

Dazed_and_C0nfused

The government "tops us" these contributions with the tax she has paid. e.g. If she pays in £1,000 into her AVCs, the government adds £250 tax relief to the pot.

No they don't.  There is no link between the tax she has paid and tax relief added to relief at source pension contributions.

There are plenty of non taxpayers who contribute and get tax relief each year.

What_time_is_it

Dazed_and_C0nfused said:

The government "tops us" these contributions with the tax she has paid. e.g. If she pays in £1,000 into her AVCs, the government adds £250 tax relief to the pot.

No they don't.  There is no link between the tax she has paid and tax relief added to relief at source pension contributions.

There are plenty of non taxpayers who contribute and get tax relief each year.

So will she get tax relief (paid in at 25p for every £1) on ALL her AVCs then?

molerat

What_time_is_it said:

Dazed_and_C0nfused said:

The government "tops us" these contributions with the tax she has paid. e.g. If she pays in £1,000 into her AVCs, the government adds £250 tax relief to the pot.

No they don't.  There is no link between the tax she has paid and tax relief added to relief at source pension contributions.

There are plenty of non taxpayers who contribute and get tax relief each year.

So will she get tax relief (paid in at 25p for every £1) on ALL her AVCs then?

AVC contributions that are paid from salary but NOT taxed at source?

Which contribution method is it ?

If relief at source the provider will top up 25%

If net pay then funds are deducted from gross pay before tax.

Dazed_and_C0nfused

What_time_is_it said:

Dazed_and_C0nfused said:

The government "tops us" these contributions with the tax she has paid. e.g. If she pays in £1,000 into her AVCs, the government adds £250 tax relief to the pot.

No they don't.  There is no link between the tax she has paid and tax relief added to relief at source pension contributions.

There are plenty of non taxpayers who contribute and get tax relief each year.

So will she get tax relief (paid in at 25p for every £1) on ALL her AVCs then?

If they are qualifying contributions made using the relief at source method then yes.

But there are 4 methods that can be used to contribute so you need to understand which is applicable.

Net pay is often used and that doesn't get any pension tax relief, these contributions reduce your taxable income so less PAYE tax is paid.