Can we use more of my wife’s personal tax allowance?

24 July 2019

Q

My wife and I both retired in our late 50s. She has a small civil service pension, which does not use up all her personal tax allowance.

Our only other income at present is from a Sipp in my name. Can I gift some of this to her as her own Sipp, or change it so it is in both our names – that is, a joint Sipp, so that we can both use our annual tax-free allowances?

From
PB/Cambridgeshire

A

You would not be able to transfer your Sipp into joint names or transfer any of your pension across to your wife’s pension.

Even if you were to take money out of your pension with the idea of gifting it to your wife, you would then pay tax on it so it would not be tax efficient for you.

However, if either of you were to earn any money in the future, then that could be put into a pension in your wife’s name.

The income generated from this would consequently use up more of her personal allowance.

Looking beyond pensions, there are other ways of utilising your annual tax-free allowance. You could, for instance, transfer other joint savings into your wife’s name.

Another way forward would be to make use of the marriage allowance. This allows a partner with an income below the personal allowance to gift 10% of their tax allowance to a higher-earning partner.

To qualify for this, the higher earning partner would need to be a basic-rate tax payer but it could save you up to £250.

You can also backdate claims to include any year in which you could have qualified for the marriage allowance since 5 April 2015.