Carry Forward Allowance Query

Jeelzuk

Hi there, I'm looking for a bit of advice on how the pension 'carry forward allowance' contribution rules work. Do contributions made retrospectively attract tax relief at the same rate at which it was paid in each year? Or do these 'back payments' only attract 20% relief?
Thanks in advance for any replies.

Linton

Jeelzuk wrote: »

Hi there, I'm looking for a bit of advice on how the pension 'carry forward allowance' contribution rules work. Do contributions made retrospectively attract tax relief at the same rate at which it was paid in each year? Or do these 'back payments' only attract 20% relief?
Thanks in advance for any replies.

Tax relief on pension payments always applies in the tax year the payment was made. You cannot backdate payments. What you can do is to increase this years tax allowance by whatever is left over from the 2 previous years. Note that you cannot carry forward anything to increase the earned income limit. That is always based on this years income only.

ffacoffipawb

Linton wrote: »

Tax relief on pension payments always applies in the tax year the payment was made. You cannot backdate payments. What you can do is to increase this years tax allowance by whatever is left over from the 2 previous years. Note that you cannot carry forward anything to increase the earned income limit. That is always based on this years income only.

It's 3 previous years, I think.

Jeelzuk

Thanks for your replies. I think I'm beginning to get my head round it. So if, for example, I earned £60,000 a year and had paid no pension contributions till now. I could put up to £160,000 into my pension using the previous 3 years unused allowance plus this years allowance but I would only receive higher rate tax relief on the first £10,000. ie. The higher rate tax I will pay this year?

MallyGirl

you could only do this if you earned £160k - you still cannot put in more than your earned income

grnglide

If you really have "paid no pensions up till now" then you cannot use carry forward.


You must have been in a pension scheme to use carry forward. You do not have to paid anything into a pension in these years but you need to have done at some point, even if it is 20 years ago.

Jeelzuk

Thanks all.That clears things up a bit. The figures given were just to keep things simple and suitable pension provisions have been made. I had been wondering if I could make use of the years where I hadn't fully utilised the higher rate tax payments. However, I can see now that since I don't earn more than £40,000 over the higher rate tax threshold this is not going to be possible.

Albermarle

You can still get basic rate tax relief on earnings below £50K but as said the max you can put in a pension in anyone tax year is how much you have actually earned .