Maximum tax free contribution?

BoGoF

You just nees to keep records for yourself in case you are asked why you are paying more than your annual allowance.

Your level of personal allowance would indicate a level of income between £103k and £104k. Are these all relevant earnings? How much are you intending paying to your pension?

Chippy99

BoGoF wrote: »

You just nees to keep records for yourself in case you are asked why you are paying more than your annual allowance.

Your level of personal allowance would indicate a level of income between £103k and £104k. Are these all relevant earnings? How much are you intending paying to your pension?

Thanks, The £10k I mentioned wasn't my personal allowance, it was my tax-free pension allowance.

I'd be looking to put all £137,000 into my pension (and yes, that's less than my annual income).

HappyHarry

Chippy99 wrote: »

Thanks, The £10k I mentioned wasn't my personal allowance, it was my tax-free pension allowance.

I'd be looking to put all £137,000 into my pension (and yes, that's less than my annual income).

Hang on , this doesn't add up.

You can carry forward unused allowances from the previous three tax years. i.e.

Maximum £40,000 2017/18
Maximum £40,000 2016/17
Maximum £40,000 2015/16

The above assumes you and your employer made no contributions in those years.

However, you say in your earlier posts that you did use your full allowance in 2015/16 and 2016/17. This means you only have 2017/18's allowance to carry forward.

With an allowance in 2018/19 of £10,000, then the most that you can contribute without penalty is £50,000.

** Edited to take account of previous contributions **

Chippy99

Sorry - Previously I said I'd put the maximum in in the earlier years. This was an error - I don't know what I was thinking when I wrote that. Maybe I had a brain fart and was mixing it up with my ISA allowance for those years! DOH!

The £127k number is only rough. I have not yet been through the relevant previous years data to check the actual amounts, but as a rough estimate the carry forward amount should be of that order.

HappyHarry

Chippy99 wrote: »

Sorry - Previously I said I'd put the maximum in in the earlier years. This was an error - I don't know what I was thinking when I wrote that. Maybe I had a brain fart and was mixing it up with my ISA allowance for those years! DOH!

The £127k number is only rough. I have not yet been through the relevant previous years data to check the actual amounts, but as a rough estimate the carry forward amount should be of that order.

OK, so that will now only give a maximum of £120,000 that you can carry forward from previous years.

aldershot

xylophone wrote: »

You are aware of the difference (for pension tax relief) between income and relevant earnings?

Can I just jump in for clarity on this point? Does the sale of stock options count as relevant earnings? It’s my only income this year and was subject to 45% tax from my previous employer. I was hoping to put the whole lot into my SIPP before moving to drawdown, getting all the tax back, and getting it straight back out again as part of the 25%.

EdSwippet

aldershot wrote: »

Can I just jump in for clarity on this point? Does the sale of stock options count as relevant earnings?

Tricky to find an answer to this, isn't it? If you mean a stock option exercise on a non-approved scheme then the best I could find was this piece of legislation, which suggests yes, since 'employment income' is pension 'relevant earnings':

476 Charge on exercise, assignment or release of option by employee
(1)This section applies if the employee realises a gain by exercising, assigning or releasing the share option.
(2)The taxable amount determined under section 478 counts as employment income of the employee for the relevant tax year.
(3)The “relevant tax year” is the tax year in which the option is exercised, assigned or released.
(4)Subsection (2) is subject to—
section 519 (approved SAYE option schemes: no charge in respect of exercise of option),
section 524 (approved CSOP schemes: no charge in respect of exercise of option), and
section 530 (enterprise management incentives: no charge on exercise of option to acquire shares at market value).

If however you mean a sale of shares held from previously exercised options, no. That's a plain capital gain (or loss!). Only the gain on exercise is 'employment income'.

Mandelbaum

Hi all, I have a follow up question on this topic as I'm in a similar position...

I will soon have a windfall from a house sale and would like to invest some of the proceeds in my pension and looking to use the last 3 years' allowance (earned more than £40k in each so could use the maximum allowance)

By way of example my last tax year's pension contributions were made up of:
My net contribution - £4983.50 from a PAYE salary
Tax relief on my contributions - £1245.90
Employer contributions £3184.02
Total £9413.42

From which number(s) do I subtract the £40k allowance?

Many thanks in advance

NoMore

You only have to worry about the annual allowance and carryover if you have enough income in the current year to use them.


Example, earn 60k, therefore max possible contribution is 60k (40k, plus left over allowance from previous years of 20k, if you have it).


Most people run into the earnings limit before the annual allowance plus carryover limits. EDIT: The OP is one of the ones that has enough income and carryover for the earnings limit not to apply.

aldershot

EdSwippet wrote: »

Tricky to find an answer to this, isn't it? If you mean a stock option exercise on a non-approved scheme then the best I could find was this piece of legislation, which suggests yes, since 'employment income' is pension 'relevant earnings':

If however you mean a sale of shares held from previously exercised options, no. That's a plain capital gain (or loss!). Only the gain on exercise is 'employment income'.

Thanks for this. It was the proceeds of a cashless sale of stock options. Income tax was withheld at the highest rate which does suggest to me that it should be treated as earned income and not any form of capital gain. Previous option sales when I was still an employee, all formed part of that year's total taxable pay.