Timing personal contributions through the tax year?

michaels

Obviously it is not allowable to contribute more to a pension that you earn each year.

I wish to make personal contributions to my pension this year equal to my income. Can I contribute the full amount now although obviosuly I won't have earned all the income until next April or am I restircted to contributing what I earn each month?

Thanks

bigadaj

michaels wrote: »

Obviously it is not allowable to contribute more to a pension that you earn each year.

I wish to make personal contributions to my pension this year equal to my income. Can I contribute the full amount now although obviosuly I won't have earned all the income until next April or am I restircted to contributing what I earn each month?

Thanks

You can contribute more than you earn if you have carry forward available, ie unused allowance from previous years.

Don't believe there is any restriction on the timing of the payments, my preference would probably be to do it monthly to ensure that the money is invested at a spread of prices for the year, though having said that I do tend to invest isas as lump sums, generally split between two or three different funds.

mania112

No, so long as you're square by the end of the year it's fine.

kangoora

One potential issue, if you lose your job or suffer a loss of earned income but you've already put away a year's salary into your pension.

Seeing as you've already put away pension payments and got tax relief on your full 'expected' salary HMRC could come after you for a refund and possibly fines for over-contributing. I'd imagine it might get a bit messy if this occurred.

kidmugsy

bigadaj wrote: »

You can contribute more than you earn if you have carry forward available, ie unused allowance from previous years.

You can, but why would you? The tax deferral advantage would not apply to the surplus.

Otherwise, I agree with kangoora; you'd be counting your chickens. I suppose it would be OK to contribute the sum of your earnings to date plus any future earnings that you look on as guaranteed e.g. corresponding to a notice period.

FatherAbraham

bigadaj wrote: »

You can contribute more than you earn if you have carry forward available, ie unused allowance from previous years.

Sorry, no you can't.

You simply can't contribute more than your taxable earnings in any tax year.

Carry-forward applies to the annual allowance -- but cannot help you avoid the taxable-earnings limit.

Warmest regards,
FA

jem16

FatherAbraham wrote: »

Sorry, no you can't.

You simply can't contribute more than your taxable earnings in any tax year.

You can but you simply won't get tax relief on any more than 100% of your earnings so as kidmugsy says it's pretty pointless.

http://www.pensionsadvisoryservice.org.uk/about-pensions/saving-into-a-pension/how-much-can-i-pay-into-a-pension

FatherAbraham

michaels wrote: »

Obviously it is not allowable to contribute more to a pension that you earn each year.

I wish to make personal contributions to my pension this year equal to my income. Can I contribute the full amount now although obviosuly I won't have earned all the income until next April or am I restircted to contributing what I earn each month?

You can contribute in anticipation of future earnings in this tax year, but you run the risk of having over-contributed if those anticipated earnings are not realized.

In the key features of several of the personal pensions which I hold, there are details of how a member may request a refund of contributions which have been made in excess of what actually qualified for tax relief. It is generally at the discretion of the pension provider, and must be requested within six years of the contribution.

Furthermore, there is an obligation upon the member to inform the pension provider of any contributions which do not qualify for tax relief, so that the provider can avoid claiming tax relief on those contributions.

Presumably if one does not obtain a refund of non-tax-relieved contributions, they become part of the pension fund, and will be taxed upon withdrawal, in effect having suffered income taxation twice -- once on the way in, and once on the way out. Ugh.

Warmest regards,
FA

michaels

Thanks for all the input - I understand the risk of income coming in under expectations but against that seems to be two issues.
1) My pension year seems to run December to December so I would like to do it before 19th December to take advantage of the allowance carry over.
2) It might be worth making the full years contribution before the July budget 'just in case'