countrymum;213658 wrote:Mr GL;213621 wrote:
Pension – add £2,880 – and get tax relief bringing it up to £3,600 (I don’t know / understand how the tax relief works -assuming I am not working / have no income and wife's employer is contributing 24k a year to her own pension – not sure who of us it is better for the contribution to come from – wife is not a higher rate tax payer (she earns less than £50k PA) – I earn pretty much nothing) – and then I would like to do the same in the next tax year. The pension contributor is only relevant if there is a more efficient way to get additional tax relief if it comes from wife or I - I dont think it can 'come from' my mum's estate?
My understanding is that kids only qualify for basic tax relief - unless they are a high income earner in their own right. And it doesn't matter who puts in to it.
The way the pension works is that the tax relief of 25% is added to your contributions by the provider of the pension and invested for the child in his or her pot.
For example if you put in the maximum yearly lump sum of £2,880 this will be automatically increased to £3600 by the provider.
Similarly is you put in £240 a month this will be automatically increased to £300.
Parents and grandparents can contribute subject to these ceilings.
The tax relief is at the standard rate. The way it works is not a tax relief to you but a tax enhancement channelled to the child's pot.
My understanding is that you are allowed to give £3k a year to children and grandchildren without it potentially figuring in inheritance tax. That is £3 in total or £6k a year for both parents. If, for example, you intend to assist 3 beneficiaries, then it's £1k each or £2k each if both parents are contributing.
Any monies in excess of this are not potentially subject to inheritance tax if you live for at least 7 years. I'm no expert so I suggest it may be useful to double check what I have said in this paragraph.