Carrying Forward Allowance

jim8888

I was thinking of boosting my wife's pension fund. As I understand it, the maximum I could put into her pension every year would equate to the level of her salary - if she earns 15k gross, she can put 15k into a pension (minus the tax bit HMRC throw in). My question is can she use the previous 3 year's worth of unused allowance that would mean that I might be able to stick 30k into a pension for her this year?

zagfles

No (technically yes but you won't get tax relief on the excess, which usually means it's a bad idea).

The tax relief limit (100% of earnings or £3600) can't be carried forwards. It's only the annual allowance that can be carried forwards, that's a completely separate limit (ignore any simplistic rubbish you might read that tries to combine the limits).

jim8888

Thanks Zagfles, but I'm confused. What's the annual allowance that can be carried forward then? If my wife earns 15k a year, how much can she put into her pension this year with any allowances taken into account?

zagfles

jim8888 wrote: »

Thanks Zagfles, but I'm confused. What's the annual allowance that can be carried forward then? If my wife earns 15k a year, how much can she put into her pension this year with any allowances taken into account?

£12k net, ie £15k gross.

Assuming the £15k is after deduction of any contribution she makes to a workplace pension.

LXdaddy

jim8888 wrote: »

Thanks Zagfles, but I'm confused. What's the annual allowance that can be carried forward then? If my wife earns 15k a year, how much can she put into her pension this year with any allowances taken into account?

The carry forward of unused annual allowance only comes into play of your income is higher than the annual limit.

For example if the annual limit is £40,000 and your salary is £65,000 you can't put in more than £40,000 unless you have unused annual allowance during the previous three years. If you had only put £10,000 into your pension in the previous year that would give you £30,000 of unused annual allowance to bring forward so you could use £25,000 of that to allow you to put £65,000 into your pension this year.


You can't put in more than your earnings (unless your earnings are below £3600 because you CAN put in up to £3,600)

The unused allowance can be used to increase the maximum that you can put in but you can't go above your earnings.

jim8888

Thanks guys, think I get it now and can embark upon my cunning plan to gain some tax relief, although it's not quite as cunning as I thought it could be!

Isabelrabbit

I was thinking of boosting my pension with additional lump sum payments. I now find because I am in a low paid job that I cannot used any unused relief from previous years.
Does anyone else think that this is totally unfair! ( Ok I know from my days working from an accountants that tax is not meant to be fair) but if the Government want people to save fir their retirement surely we should all be able to carry forward unused allowances and not just those earning £40,000 or more.

System

Isabelrabbit wrote: »

I was thinking of boosting my pension with additional lump sum payments. I now find because I am in a low paid job that I cannot used any unused relief from previous years.
Does anyone else think that this is totally unfair! ( Ok I know from my days working from an accountants that tax is not meant to be fair) but if the Government want people to save fir their retirement surely we should all be able to carry forward unused allowances and not just those earning £40,000 or more.

No! If you are not paying much tax then you do not get much tax relief.

zagfles

Isabelrabbit wrote: »

I was thinking of boosting my pension with additional lump sum payments. I now find because I am in a low paid job that I cannot used any unused relief from previous years.
Does anyone else think that this is totally unfair! ( Ok I know from my days working from an accountants that tax is not meant to be fair) but if the Government want people to save fir their retirement surely we should all be able to carry forward unused allowances and not just those earning £40,000 or more.

If it was allowed the main use of it would be for recycling ie someone coming up to 55 thinks ooh - I can put my £10k savings into my pension and take it straight out again and turn it into £12.5k.