Understanding carry forward

zagfles

NoMore wrote: »

Sigh, your really going to make me do this!

From the HMRC TAX MANUAL https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm055100#carryforwardgeneral



Meaning you have to use the full annual allowance for the current tax year before you move to using carry forward. The current Annual Allowance is 40k. You need to have earned income of more than 40k in order to use up all your AA for the current year before you can use carryforward.

While I suspect the PP is trolling, the fact is that there is nothing whatsoever in the annual allowance rules that states that. There is no reference whatsoever to earned income in the AA rules (other than the >150k taper).

So there's no point quoting HMRC annual allowance rules because they don't address the PPs point. My link above addresses the PP's point, and that link is nothing to do with the AA.

zagfles

HappyHarry wrote: »

How can they take advantage of the carry forward rule if they are earning under £40k?

Someone earning £35k in a public sector DB scheme could easily take advantage of it.

HappyHarry

zagfles wrote: »

Someone earning £35k in a public sector DB scheme could easily take advantage of it.

Good point.

I should have learned by now just to leave the AA threads to you 😀

NoMore

Fair enough zagfles, I did try to find a relevant passage to quote in your link but couldn't find it, perhaps if you could actually quote from the link would help.

zagfles

NoMore wrote: »

Fair enough zagfles, I did try to find a relevant passage to quote in your link but couldn't find it, perhaps if you could actually quote from the link would help.

From https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm044100 (note the link is nothing to do with the AA, it's tax relief rules):

The maximum amount of contributions on which a member can have relief in any tax year is potentially the greater of:

• the ‘basic amount’ - currently £3,600, and
• the amount of the individual’s relevant UK earnings that are chargeable to income tax for the tax year.

[...]
Unused tax relief can no longer be carried backwards or forwards to other tax years.

NoMore

Well we tried that answer but trampie didn't want to accept it!

trampie

My take is that somebody can get tax relief on pension contributions of up to 100% of their earnings or a £40,000 annual allowance, whichever is lower.
Therefore somebody earning £24k a year can use carry forward to make use of unused annual allowances, that is my take but im no expert and nearly all posters on this thread seem to think they cant unless they earn at least £40k a year.
If my understanding is wrong, obviously I will accept hard evidence that my understanding is wrong.
The thread starter seems to think its possible but didn't know how to go about it, I am in the same boat I thought it was possible but also do not know how to go about it, but alas posters on here [with many posts to their name] seem to say that the thread starters other half cant do it because he does not earn enough.

Dazed_and_confused

They earn £24k

They contribute £24k (if relief at source £24k being the gross amount including the basic rate tax relief).

What carry forward is required?

zagfles

Here's a silly analogy.

The speed limit on a road is 40mph. Every 4 miles there's an average speed camera that checks you've not averaged over 40mph in the last 4 miles.

So if you go 20mph for 3 miles, then if you go 60mph for the next mile you'll be OK. (carry forwards!)

That's a bit like the annual allowance.

BUT you're on a moped that can only do 30mph. So the speed limits don't matter, you're constrained by the limits of your vehicle, a different limit, which is lower.

Even if you go 20mph for a bit, your moped still can't over 30mph to make up for it, you're still stuck at 30mph as the max.

That's like the tax relief limit.

There are 2 separate limits with different rules. The speed limit and your vehicle's limit.

That's like the annual allowance, and the tax relief limit.

:cool:

trampie

Dazed_and_confused wrote: »

They earn £24k

They contribute £24k (if relief at source £24k being the gross amount including the basic rate tax relief).

What carry forward is required?

If they earn £24k and have earned the same amount for the last 4 or 5 years and pay £24k into their pension pot this tax year but in the 3 previous tax years they did not pay £24k into their pension pot, could they not make the difference up by carrying forward their unused allowances for the last 3 tax years ?