Exceeding £40,000 annual allowance

jamesd

You might consider some VCT use, since the 30% relief from that, capped at income tax in the year, can be used in the basic rate band as well as higher. Have to repay if you sell within five years, dividends are tax exempt. Handy for those who can afford to defer their income for five years, though there are some that pay out 10% or so a year (after allowing for the effect of the tax relief) and this can help if income is needed.

Sobryma

You might also consider using a partner as a tax haven, my other half has a stakeholder plan that I pay into - we will see what happens in the budget but I may need to put more in her pension.

PaulCooper

Just to add an answer to this. Last tax year I mistakenly paid in more money than I was permitted to into my SIPP, this mistake also took into account carry forward (or carry back allowances)
I exceeded the amount allowed to be paid in by approx. £5k.
My SIPP provider highlighted this. The result is that after my SIPP provider talking to HMRC, I will have to pay HMRC 40% of the overpayment (similar to me having taken the £5k as salary). Interestingly there is no mention of paying NI on the £5k and the tax due, providing it amounts to more than £2k can be paid from the SIPP.
Fair play to my SIPP provider, as I have had an additional bill from my tax accountant to restate my tax return, the SIPP provider has paid the additional bill

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I hasten to add it was some wrong information from the SIPP provider that led me to overpay
Anyway, all that is behind me as I retired last year and am accessing the SIPP funds

jamesd

Yes, that's how it's handled if someone does go over the limit and doesn't do the tax return thing.

The SIPP provider will always be expected to tell you if you pay in more than 40k but they don't know how much carry forward is available for the purposes of sending that letter.

wary

Does it make any difference if these are company contributions that take you over the 40K but by utilising carry-forward ... wrt what you personally have to do and more significantly what the company needs to do?

Sobryma

If the company contributes it counts, its total contributions. You can use carry forward, HMRC have calculators - it is not absolutely straight forward as you have to have been in a pnsion scheme and you have to earn more than your pension contributions.

LXdaddy

The other "wrinkle" to consider is if you have more than one pension provider (perhaps a company pension and a freestanding AVC or a SIPP) then each administrator only knows what is happening in their particular scheme. But your Annual Allowance is across all the schemes. So if you had two schemes and they both grew by £25K neither would be warning you or HMRC but you need to be aware that you have contributed £10K over this year's limit.