Annual Allowance carry forward

LXdaddy

I understand that any unused Annual Allowance (relating pension input) can be rollwed forward so that in a year when I exceed the annual allowance I can use Unused allowances from the previous three years.

If I exceed the annual allowance in a year by less than the unused allowance from the previous three years I don't get a tax charge. But having done so, if I exceed the annual allowance in the next year can any of the previous allowance still be taken advantage of?

Let's say that each year I have pension input which is £5K less than the Annual Allowance but in 2014-15 I exceed the Annual Allowance by £8K - not a problem because there is £15K unused from the three previous years. 2013-14, 2012-13 and 2011-12.

If I then exceed the 2015-16 Annual Alowance by 6K am I still OK?

Does the first £8K excess consume all of the 2011-12 unused and 3K of the 2012-13allowance, leaving 2K of 2012-13, 5K of 2013-14, and zero of 2014-15... so there is still £7K left of unused to apply to 2015-16's over contribution?

OR... once I use some of the previously unused is it all considered as used (which sounds a bit harsh)

Background... I might well have over contributed in the Pension Input Period just ended but I have plenty unused AA from the last three years. If I don't change my level of contribution to AVCs I might well over shoot the Annual Allowance in the current Pension Input Period.

jamesd

Yes, the unused part of the allowance from previous years remains available. The unused allowance from the oldest of the three years is used first, then the second and finally most recent. You're still OK in your example.

ozzage

Alternatively, you can use this tool to check

http://www.hmrc.gov.uk/tools/pension-allowance/calculator.htm

dunroving

ozzage wrote: »

Alternatively, you can use this tool to check

http://www.hmrc.gov.uk/tools/pension-allowance/calculator.htm

Worth noting that this calculator applies to defined contribution schemes (it asks for "pension input amount").


I presume that those in final salary or other defined benefit schemes would enter annual accrual ...? [not personal contributions/pension input]

Sobryma

dunroving wrote: »

Worth noting that this calculator applies to defined contribution schemes (it asks for "pension input amount").


I presume that those in final salary or other defined benefit schemes would enter annual accrual ...? [not personal contributions/pension input]

You should have a Pension Input amount on your DB statement, we did when I was in one a few years back. I use its values against the HMRC carry forward calculator to avoid a tax charge.

LXdaddy

ozzage wrote: »

Alternatively, you can use this tool to check

http://www.hmrc.gov.uk/tools/pension-allowance/calculator.htm

Yes I tried both the calculators on HMRC website but found it difficult to understand the output.

Thanks for the clarity of answer from jamesd

goodValue

These posts have talked about pension input. Is this also appropriate for other income?
For example, if one year I earned £1000 less than the income tax allowance, and the next year I earned £1000 more than the allowance, I would be able to use the carry forward?

coyrls

goodValue wrote: »

These posts have talked about pension input. Is this also appropriate for other income?
For example, if one year I earned £1000 less than the income tax allowance, and the next year I earned £1000 more than the allowance, I would be able to use the carry forward?

The answer is "no".

Pension input is not income, it is a contribution from income. You cannot contribute more that your income in any year and you cannot carry forward income from previous years, so that would be consistent with not carrying forward unused tax allowances from previous years.

jamesd

goodValue wrote: »

For example, if one year I earned £1000 less than the income tax allowance, and the next year I earned £1000 more than the allowance, I would be able to use the carry forward?

If you were in a pension scheme, even not paying in, you could in theory use carry-forward. In practice you couldn't use carry-forward because the current year's £40k allowance is used first and that is higher than the maximum permitted pension contribution for a person with an earned income of their personal allowance plus £1k.

goodValue

Thanks, for the replies, even though they were disappointing.