AVC tax relief limited by tax paid at top rate?

[ricta]

Hi,
I am calculating what lump-sum AVC my wife could/should pay for 2007. She is 50+ so can put 30% of gross salary into pension, she pays 5% p.a. into a DB fund, leaving a possible 25% for AVC. This 25% amounts to €8687, giving relief @ 41% of €3560.

I imagine this relief of €3560 would be limited by the amount of tax paid by her at the 41% rate in 2007, if so how would that be calculated. We have already done a joint tax return for 2007; in this, €16866 was taxed at 41% but it doesn't say how much of this is apportioned to my wife and how much to me. Does it matter?
Her 2007 P60 shows she paid 41% on €7,753.70 for the year. My P60 shows I paid 41% on €10,714.

 

[LDFerguson]

As tax relief on pension contributions is not transferable between spouses, if her AVC contribution is €7,753.70 it will attract tax relief at 41%. In effect, the AVC contribution reduces her gross income.

If she makes the full 25% (€8,687) contribution, she will attract tax relief at 41% on €7,753.70 and 20% on €933.30. As the effect of this is relief of almost 39% on the entire contribution, I'd be inclined to think it's worth it.

 

[ricta]

Thank you Liam, that's exactly the information I needed to clear my thinking.

Regards

Ricta