Pension contributions into wife's plan

zagfles

microcristallina said:

zagfles said:

microcristallina said:

Not sure how long she hasn't been working for but you can carry forward unused allowance from the 3 previous tax years.

You CANNOT carry forwards the tax relief limit. Carry forwards applies to the annual allowance which is a totally separate thing. Anyone earning under £3600 can only get tax relief on a maximum of £3600. No carry forwards for this.

Thanks that's not how I interpreted it from the gov.uk website. Very useful to know as i was considering doing this for my mum

No worries, it's a common misunderstanding, even IFAs get it wrong. There are two separate limits which come from different legislation and apply to different things.

The tax relief limit applies just to personal/employee contributions and is a limit on how much tax relief you can have. Basically your earnings (or £3600 if more) as a gross contribution (inc the tax relief). Theoretically you can put in more but aren't entitled to tax relief, but in practice most pension providers don't accept contributions on that basis. There is no carry forwards.

The annual allowance of £40k for most people is a separate limit and it includes employer contributions as well as personal/employee contributions (DB pensions are more complicated). It allows carry forwards of unused annual allowance in previous years subject to certain rules. Again you are allowed to exceed it, but you get taxed if you do.

NannaH

As an aside,  if you aren’t a higher rate tax payer,  is your wife transferring part of her personal allowance to you?   It’s worth about £240 a year from memory.   

My husband got caught out with this though,  he got a promotion and thought he’d increased his pension contributions enough to keep him under the higher rate limit but he had a letter from HMRC saying he owed £500 in tax due to over claiming the married allowance for 2 years 🙄
It turned out his employers hadn’t increased his contributions by the percentage he asked for.  

Albermarle

microcristallina said:

zagfles said:

microcristallina said:

Not sure how long she hasn't been working for but you can carry forward unused allowance from the 3 previous tax years.

You CANNOT carry forwards the tax relief limit. Carry forwards applies to the annual allowance which is a totally separate thing. Anyone earning under £3600 can only get tax relief on a maximum of £3600. No carry forwards for this.

Thanks that's not how I interpreted it from the gov.uk website. Very useful to know as i was considering doing this for my mum

It is probably the most misunderstood pension issue that we see on this forum. So you are not alone. The HMRC/Govt info is less than clear, and on some other points they are actually wrong/misleading. Anything you are not sure about, just post a question on here.