Carrying forward past year's allowance - which year does it come from?

dunroving

In terms of carrying forward past years' unused tax allowance for pension contributions, I can find lots of scenarios that clearly show that you can carry forward and use past years' unused pension tax relief allowance, but it's not clear from the explanations I have read how this works, specifically in terms of where (which past year) the additional allowance is drawn from.

I can't find an answer to the following:

I have unused tax allowance/tax relief for each of the past 3 years. I know I can carry these forward. This year, I would like to contribute more than £40k to pension.

I want to know, if for example I contribute £50k to pensions this year, which of the past 3 years' unused allowances will the £10k be deducted from?

For example, if my unused allowances were £30k for each of the past 3 years, will the £10k additional allowance be deducted from my oldest (2011-2012) tax year, or from last year's unused allowance? Or the middle one (not likely)?

Next year, will my unused tax allowances look like this:

2012-2013 £30k unused
2013-2014 £30k unused
2014-2015 - full allowance used (plus £10k drawn from 2011-2012 unused allowance)

or like this:

2012-2013 £20k unused (£10k carried over and used in 2014-2015)
2013-2014 £30k unused
2014-2015 - full allowance used (plus £10k drawn from 2012-2013 unused allowance)

or like this:

2012-2013 £30k unused
2013-2014 £20k unused (£10k carried over and used in 2014-2015)
2014-2015 - full allowance used (plus £10k drawn from 2013-2014 unused allowance)

hugheskevi

Oldest year.

Ref here:

Once the current year’s AA has been used the oldest year of unused AA is carried forward.

david78

Once the current years allowance has been exhausted, unused allowance may carried forward from the last 3 years in order of oldest first -to last year last.

I am not sure how you actually carry out this process. Who do you inform, etc. There doesn't seem to be anywhere on a SA form as far as I can see. Perhaps you just keep your own records?

Shedman

David. I guess it's a bit like CGT losses carried forward (and unfortunately I know about those....) where you need to keep your own records (or at least refer back to the prior years SA form for looking up what you carried forward last year)

david78

Shedman wrote: »

David. I guess it's a bit like CGT losses carried forward (and unfortunately I know about those....)

Me too.

Probably have to set up a spreadsheet then (and keep a paper copy).

AlanP_2

Remember it yourself I think so that you can track / monitor usage against it but official "record" will be with HMRC when they get the value of contributions to all your pensions from the various companies that may be involved.

dunroving

AlanP wrote: »

Remember it yourself I think so that you can track / monitor usage against it but official "record" will be with HMRC when they get the value of contributions to all your pensions from the various companies that may be involved.

Do they get an estimate of the accrued value of a DC pot?

I have been online on the USS site and their estimates of whether I am in danger of exceeding my annual limit seems to be based solely on contributions, not increase in value of the pot.

(sorry if I am using the wrong terminology!)

dunroving

hugheskevi wrote: »

Oldest year.

Ref here:

Thank you - I have downloaded that to remind myself when I have forgotten the answer!

AlanP_2

dunroving wrote: »

Do they get an estimate of the accrued value of a DC pot?

I have been online on the USS site and their estimates of whether I am in danger of exceeding my annual limit seems to be based solely on contributions, not increase in value of the pot.

(sorry if I am using the wrong terminology!)

Again not an expert reply but my understanding from what i have picked up on here and elsewhere:

A DC pot is based on the contribution value (same as a personal pension), a DB pot (Final Salary, CARE type scheme) uses the calculation around increase in "value" over the period.

No idea what system USS scheme uses so can't comment directly on that.

dunroving

AlanP wrote: »

Again not an expert reply but my understanding from what i have picked up on here and elsewhere:

A DC pot is based on the contribution value (same as a personal pension), a DB pot (Final Salary, CARE type scheme) uses the calculation around increase in "value" over the period.

No idea what system USS scheme uses so can't comment directly on that.

I have found a formula to help calculate this, and even created my own Excel spreadsheet to try to calculate for my own. However, my situation is complicated by the fact I am buying added years and (I think) I'd need to figure out how many additional years (actually fraction of a year) I earn each year.

But I am surprised that the USS modeller doesn't appear to be including the increase in value of the pot. The figures it gives me seem too low (although I have only been in the scheme for less than 10 years, so maybe that's it). I know some of the higher earners and people who get a big salary bump and/or have been in the scheme for 20-30 years are running scared of the annual allowance these days.