Exceeded Annual Allowance - which year?

davidwatts

I just wanted to check if my understanding of the following circumstances was correct.

Employment ends Feb 18
Final payslip received March 18 including redundancy payment
Pension deduction including taxable redundancy exceeds £40k
Pension contribution not credited to DC pension account until April 18 (in accordance with the typical delay experienced every month)

My take on the situation is that the annual allowance was exceeded in 17/18 and that (in the absence of any further contributions) no contributions have been made in 18/19 despite the last one not being credited to the pension account until April.

Am I right in thinking that the contribution is made on the relevant payroll date regardless of when it eventually appears in the pension account?

Marcon

See https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm041000#IDA0QUFG

(link provided in case others have queries on similar but not identical circumstances)

choccielover

That’s interesting and may just lead to a call to hmrc from me

I had an issue last year where I made a large payment to my pension from bonus in march but it didn’t get credited till April

This was then classed as a 18/19 use of allowance which was annoying because I actually wanted to use up unused allowance from 16/17

I wrote to the hmrc who sent me a letter saying as the payment didn’t credit pension till April it was too late

zagfles

Marcon wrote: »

See https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm041000#IDA0QUFG

(link provided in case others have queries on similar but not identical circumstances)

Note that cover RAS and net pay, not salary sacrifice - which are employer contributions. I'm not sure but would imagine that the payroll deduction date is irrelavent for sal sac contributions, since the aren't a "member" contribution like net pay and RAS, they are an agreement to sacrifice salary in return for the employer making a pension contribution. So I imagine it would be the date of the employer contribution that is relevant for AA purposes. But I'm not sure.

But unless you were relying on carry forwards for the 2014/15 tax year, it shouldn't matter, because if it counts in 18/19, you can carry forwards from 15/16, 16/17 and 17/18. It only if you made substational pension conts in recent years are were relying on carry forwards from 14/15 (which can be carried fowards to 17/18 but not 18/19) that it would matter.

davidwatts

Thanks for the replies, I'll read the info on the link more closely over the weekend.

It was all done and dusted as far as I was concerned, I'd had a letter from my employer last October informing me that they were obliged to tell HMRC that I'd overpaid in 17/18 but that all was fine as long as I hadn't made any contributions they weren't aware of (which I hadn't). The query was raised by the letter I've just received from the pension firm warning me that I've exceeded the annual allowance for 18/19 and may want to consider any further contributions accordingly.

I assume that's just a letter to bring the matter to my attention based on their view of when the contribution was made and that they won't also notify HMRC. The notion of HMRC thinking I exceeded the allowance in both years was my primary concern. The secondary query was whether or not I've used up this year's allowance in terms of having the option of paying anything into a SIPP before the end of the tax year!

zagfles

You need to understand how the contribution was taken - was it RAS, "net pay" or salary sacrifice? The link above will be no use to you unless you know this.

Alternatively, just ask the scheme for your "pension input amounts" for the last few tax years, and add the pension inputs to any other schemes eg a SIPP and use a claculator such as the HL one:
https://www.hl.co.uk/pensions/contributions/carry-forward-rule/annual-allowance-calculator

Note there's a lower annual allowance for very high earners or for those who've flexibly accessed their pension.

Also note there's a separate limit on tax relief on personal contributions of 100% of relevant earnings or £3600 if more - as gross conts (net would be 80% of this). Relevant earnings are generally employment earning but include some self employment but not pension, interest, dividends etc. So if you didn't earn anything this tax year you can only put in £3600 gross ie £2880 net into a SIPP. (technically you can put in more but you can't get tax relief which usually makes it a bad idea).

davidwatts

Regular contribution by salary sacrifice and AVCs (including taxable redundancy pay) by net pay.

The scheme detailed all of my input amounts in the letter they sent me informing me of their duty to notify HMRC of the overpayment. There are no other schemes.

So my take is that the overpayment did, indeed, occur in 17/18.