Transfering money from trading account to wife's SIPP - legal?

[IsuzuIse]

I recently received a six-figure windfall. I maxed out my £20k S&S ISA allowance with some of it. I already contribute the maximum of £40k pa to my employer's pension scheme and have done for >3 years. With nowhere more tax efficient to put the remainder, I parked it in index funds in my fund supermarket's trading account.

Having no debts or mortgage, a decent emergency fund, a healthy S&S ISA balance, and being happily married with no imminent need for the money, I came up with the following plan to lodge some of the money more tax efficiently. Can anyone comment on whether this might be in any way illegal or otherwise flawed?

1. Caculate my spouse's pension contributions from employer contributions, salary deductions and my spouse's own SIPP contributions for this FY and the previous 3 FYs. Include the 25% uplift provided by tax refunds on my spouse's SIPP contribitions.

2. Calculate my spouse's unused pension allowance for this financial year and previous three FYs. Here I need to take into account both the £40k annual limit and my spouse's taxable income as declared on my spouse's P60; as I understand it the pension allowance maxes out at the lesser of these two values.

3. I sell enough of my trading account index funds to get 80% of the money calculated in (2). I put aside some money to pay any capital gains tax due from the sale.

4.Transfer the cash to my spouse. I believe unlimited cash gifts between spouses are both legal and not taxable.

5. My spouse puts the cash into their SIPP and invests it as my spouse sees fit.

6. My spouse's SIPP gets the 25% tax uplift after a few months. My spouse invests that cash as my spouse sees fit too.

It seems to me that if, for example, I transfer £80k to my spouse then we (in aggregate as a married couple) receive an extra £20k with the trade-off being that we can't access it at all until my spouse reaches 55 at the earliest. Maybe we will fall foul of the anti-B&B legislation if my spouse buys exactly the same asset as I sold?

Thoughts?

[swill453]

I think the £40K limit applies even to any carry forward from previous years.

i.e. she'd not be able to put in more than £40K, minus existing contributions, in any case.

Someone else might confirm or correct me.

Scott.

[DrBunsenHoneydew]

I think the £40K limit applies even to any carry forward from previous years.

i.e. she'd not be able to put in more than £40K, minus existing contributions, in any case.

Someone else might confirm or correct me.

Scott.

You can put in all your earnings and get tax relief up to the level of earnings, subject to a max of 4 x £40k less what's been used up already in this tax year and the most recent 3 prior years.

So if earn £100k and £30k has already been used in this year and 25k in each of the 3 prior years (total £105k) you can put in another £55k this year on top of this year's £30k so far (because 4x40 - 30 - 3x25 = 55 and 55+30 is still less than 100).

(There is no limit to what you can put in without tax relief of course)

[swill453]

You can put in all your earnings and get tax relief up to the level of earnings, subject to a max of 4 x £40k less what's been used up already in this tax year and the most recent 3 prior years.

Thanks for the correction. I guess what I had in mind was if the earnings this year were less than £40k, then prior years allowances wouldn't allow any more to be added this year.

Scott.

[IsuzuIse]

Thank you very much for the insight. It's an important point that the total amount we can transfer is also limited by my spouse's income for this financial year alone. I'll factor that into my calculations when I undertake the transaction.