Help calculating Pension Carry Forward

misterthrifty

I'm trying to work out if it's worthwhile using unused pension allowance from previous years to put money from savings into a new SIPP as I plan to retire in the next couple of years. The rules seem a bit complicated and the information I have read online is a bit ambiguous, so if some kind person can give me some guidance using approximate numbers it would be much appreciated.


Current salary around £25,000 plus income from other sources of £10,00 making gross income of £35,000, assume this has not changed in recent years.


Pay 5% employee & 10% employer contributions into company pension scheme from main employment.


Also when I pay into a SIPP do I anticipate how much I have contributed this year or wait until the end of the tax year so I know what my limit is?


Any help much appreciated.
TIA

Spreadsheetman

If your salary isn't over £40k then you can't use it anyway as your salary is the limiting factor for max contributions in that case.

ColdIron

There are two limits to consider. 1) Your annual allowance of £40,000, unused allowance from the previous three years can be carried forward. 2) Your annual earnings, this cannot be carried forward. Your earnings are £35,000 so you cannot use this years allowance in full or carry forward

BoGoF

ColdIron wrote: »

There are two limits to consider. 1) Your annual allowance of £40,000, unused allowance from the previous three years can be carried forward. 2) Your annual earnings, this cannot be carried forward. Your earnings are £35,000 so you cannot use this years allowance in full or carry forward

OP said of the £35,000, £10,000 came from other sources so not necessarily esrnings.

Paul_Herring

misterthrifty wrote: »

Current salary around £25,000 plus income from other sources of £10,00 making gross income of £35,000, assume this has not changed in recent years.
TIA

Another vote for "you can't use carry-forward," due to you not having enough relevant earnings for pensions contributions this tax year to use it.

You need at least £40,000 - and as postulated before, those 'other sources' may not count either.

misterthrifty

OK, thanks for that, not entirely sure why but it appears I can't use carry forward.

I understand that in each year


'As a general rule if you are a UK resident taxpayer under the age of 75, you can contribute as much as you earn each year to your pensions, up to the annual allowance of £40,000.'


so I can put extra payments for this year into a SIPP?

Paul_Herring

'As a general rule if you are a UK resident taxpayer under the age of 75, you can contribute as much as you earn each year to your pensions, up to the annual allowance of £40,000.'

Yes.. if you're earning as much, in the current tax year, as you want to contribute. i.e. if you earned at least £40K this tax year, you could contribute £40K.

If you had unused pension contributions in previous tax years, you could use any earnings over £40K this tax year to make contributions, but only up until your gross wage (and whatever carry-forward limit you had.)

While you
- can carry forward any unused pension contributions,
- what you cannot carry forward is any salary you earned in previous tax years with which to offset against those contributions.

You're earning £25,000 (or £35,000) this tax year - you cannot contribute more than that this tax year, so you've not even reached the £40K limit.