Worth starting a pension this tax year (to fill it up later) ?

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With this 3 year carry back, where I could next year put £50k into a pension and then utilise another £50k for this year minus that which I already contributed, do I need to have paid tax at 40% in 2010/11 to claim 40% tax relief or would my paying tax at 40% on £100k in 2011/12 satisfy the requirements ?

It was stated that I needed to have a pension scheme open in the year I want to use historically but I want to know whether I needed to have paid tax in that year or in the year I utilise this carry back.

Just wondering whether it is worth opening something this year or not.

Loughton_Monkey

The 'carry back' provisions will probably not help you as much as you are assuming.

The carry back provisions will simply affect the total amount you can contribute in any one tax year. The actual tax relief obtainable is determined only upon your taxable pay in the year of payment.

Hence, if you are currently a 40% tax payer and wish to maximise the tax relief, then you need to dump in enough contributions this year to 'nullify' the 40% tax you will have paid before 5th April. By all means, of course, use carry back to put even more in at 20% tax relief, but you will not get any amelioration of previous years' higher rate tax.

Similarly, leaving it until after 6th April will give you no higher rate relief on tax paid this year at all.

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Loughton_Monkey wrote: »

The 'carry back' provisions will probably not help you as much as you are assuming.

The carry back provisions will simply affect the total amount you can contribute in any one tax year. The actual tax relief obtainable is determined only upon your taxable pay in the year of payment.

Hence, if you are currently a 40% tax payer and wish to maximise the tax relief, then you need to dump in enough contributions this year to 'nullify' the 40% tax you will have paid before 5th April. By all means, of course, use carry back to put even more in at 20% tax relief, but you will not get any amelioration of previous years' higher rate tax.

Similarly, leaving it until after 6th April will give you no higher rate relief on tax paid this year at all.

So if I start a pension in 2010/11 and put £1 in then in 2013/14 I can contribute £50k for 2013/14 and then use the unused allowances from 2010/11 (and potentially for 2011/12 and 2012/13 as well) to dump another £50k into the fund as long as I have taxable of £100k in 2013/14 and I never need to have any taxable for 2010/11.

Effectively, in 2013/14 I could dump in £200k without ever having paid a penny in tax in 2010/11/12/13 as long as I had £200k of taxable in 2013/14.

That is as I read it, do you differ in your understanding ?