Carry fprward 40k allowance + Salary Sacrifice

egroeg1980

Hello.
I am planning to make larger than normal contributions to my pension this year (20/21) to reduce my tax offset and I wish to also use the Carry forward scheme to contribute more than the 40k limit per year.
In the last 3 prior tax years, I've made contributions of around 20k, but this year I have a very low outgoings AND my pay has increased significantly in the last 18 months (circa 200k Gross).
I use Salary Sacrifice with my employers pension scheme (Aviva) - my question is, does the PAYE system automatically discover that you're using Carry Forward (to redeem the surplus from prior tax years) allowing me to just automatically make significiantly higher contributions this year naturally in the system, so that by March/April I'll have made 100k of contributions (60k over for the year) of which is redeemed using the Carry Forward system (or is the some other mechanism or process I require?)
Thanks, G

Aylesbury_Duck

As I understand it, you simply need to keep a track of it yourself and if HMRC query the amount contributed, you have the records to show you're using prior tax years' allowance.  Aviva would write to you if contributions exceeded the £40k allowance.

Do be careful.  You talk about the contributions you have made, but remember that your £40k allowance includes contributions your employer makes, plus the value increase of any defined benefit pensions you hold, e.g. LGPS.  Also, the allowance tapers with high incomes, so check that your income for this year means a £40k allowance or whether it triggers a lower allowance. 

zagfles

Carry forwards has nothing whatsoever to do with PAYE, you've misunderstood the system if you think it does or should. Your pension input amount includes any sal sac your employer pays into your pension, this doesn't go via PAYE, it's direct from your employer to the pension. 

As above you need to watch out for the tapered annual allowance for those on high incomes. The thresholds were increased in the last budget but you still might be affected, and I'm not sure how carry forwards works if you were affected by the taper in previous tax years.

egroeg1980

Many thanks for the replies Duck & Zag!

Understood - SO the 40k allowance is inclusive of employer contributions as well as mine (good advice Duck!) - I assume this is also W.R.T to NI relief contributions my employer makes monthly (around £100pm variable)?

Last month I contributed a high percentage, so personal contribution of circa £7000 and employer £740 (92k total for the year) ergo the desireto claw back unclaimed contribution balance from prior years. So you're saying - continue as normal - expect a letter/email from the Pension provider around the 40k mark (but no actions needed) and then be preapred to justify as and when HMRC enquire - bascially....

ratechaser

Yep that's the one - I'll be using the last of my carryover this year and have got a spreadsheet that's detailed my adjusted income and pension inputs for the past 5 years, showing where carryover has been applied. Given the recent change to tapering thresholds, it does need some careful planning in the sort of income bracket you fall into.

If you're saying your own income is £200k and your employers regular pension contribution is £740/month (which TBH sounds a bit mean to me - in addition to my own salary sacrifice, my employer kicks in about £2k/month, even with a notional earnings cap applied), then for this tax year, you should be just under the adjusted income level where tapering would start to apply - but that assumes no other income like savings interest that could tip you over 210k total.