40k annual allowance

ADA58

the carry forward was of real benefit in my case , over 10 years overseas , contributing to a UK DB pension yet unable to be able  make AVCs (well I could but with no tax benefit), made redundant on return , so could use the carry forward allowances from last 3 years into AVC  , minus the DB total  contributions (not actual , but calculated from the scheme admin team) 
maybe a semi unique case but the carry forward really helped me 

dunstonh

Newnoel said:

The ability to carry forward unused personal allowance from the previous three years is one I would think the chancellor should abolish. It really only benefits the very wealthiest who come in to some sort of windfall

I have used it plenty of times with people who are not the very wealthiest.   It tends to be used more by middle management or company directors who generate wealth and tax revenue.  Company start ups often use it where they plough capital into the business at the start but can then use later earnings to make up for lost pension provision.

aphill24

dunstonh said:

Newnoel said:

The ability to carry forward unused personal allowance from the previous three years is one I would think the chancellor should abolish. It really only benefits the very wealthiest who come in to some sort of windfall

I have used it plenty of times with people who are not the very wealthiest.   It tends to be used more by middle management or company directors who generate wealth and tax revenue.  Company start ups often use it where they plough capital into the business at the start but can then use later earnings to make up for lost pension provision.

Is carry forward easy to do or should I use an IFA. I have just had a redundancy payout and want to use carry forward as I am in the high tax bracket. 

NottinghamKnight

aphill24 said:

dunstonh said:

Newnoel said:

The ability to carry forward unused personal allowance from the previous three years is one I would think the chancellor should abolish. It really only benefits the very wealthiest who come in to some sort of windfall

I have used it plenty of times with people who are not the very wealthiest.   It tends to be used more by middle management or company directors who generate wealth and tax revenue.  Company start ups often use it where they plough capital into the business at the start but can then use later earnings to make up for lost pension provision.

Is carry forward easy to do or should I use an IFA. I have just had a redundancy payout and want to use carry forward as I am in the high tax bracket. 

It's very easy as you probably need to do virtually nothing. Contributing more than £40k is no different to normal contributions you just need to ensure you keep records of total contributions and that for the previous years that you have the spare allowance for. My understanding is that it's rare for this to be queried but you need to have the information available if hmrc ask the question and you may get a warning hat you have exceeded the annual allowance from your pension provider, to ensure you are aware and to cover themselves.

dunstonh

Is carry forward easy to do or should I use an IFA.

It is easy to do as it requires you to do nothing but keep records.   That is unless you into the higher income levels where tapering starts to apply.  That requires a bit more in the calculation.

 My understanding is that it's rare for this to be queried but you need to have the information available if hmrc ask the question 

Pension contributions are recorded under your NI.   Cross referencing is automated and only flags up potential breaches.   So, numbers would be low.  

Mick70

on the carry forward (40k allowance rule)
i have a query, please 
Including govt tax relief added on And employer contributions I managed to get 15k into my pot last year (2019/20 tax year).   If i keep the same monthly payments this year I will hit 38k,  I am considering paying in another 3k from my savings (is this a good or bad thing to do i.e using savings which is sitting in bank tax free ?
so, if i maintain the same monthly % payments the amounts should be -
2019/20   15k
2020/21  41k
2021/22   40k
2022/23   42k 

My query is ,  because i am well below the 40k allowance in 2019/20 , can i Pay say 5k extra each year in 2021/22 and 2022/23 using the 3 year carry forward rule ?
then say in 2023/24 onwards i assume i need to cap it at 40k as 2019/20 no longer falls into the 3 year ?

many thanks for help,
Mick

Anonymous101

To answer the query, yes your assumption on how the carry forward works is correct as far as I understand it.
As you're well below the £40k in 2019/20 you've essentially generated £25k headroom over the next 3 years. Of course 18/19 and 17/18 may have also generated some additional headroom.

Whether or not you're better contributing the savings is another matter entirely and much more difficult to answer without knowing much more about your situation. Age, income, retirement plans, levels of current savings, investments and pensions all play a part in answering that.

Mick70

Anonymous101 said:

To answer the query, yes you're assumption on how the carry forward works is correct as far as I understand it.
As you're well below the £40k in 2019/20 you've essentially generated £25k headroom over the next 3 years. Of course 18/19 and 17/18 may have also generated some additional headroom.

Whether or not you're better contributing the savings is another matter entirely and much more difficult to answer without knowing much more about your situation. Age, income, retirement plans, levels of current savings, investments and pensions all play a part in answering that.

there were no prior years as I was in a final salary pension scheme then . thanks for taking time to reply

Mick

Mick70

Anonymous101 said:

To answer the query, yes you're assumption on how the carry forward works is correct as far as I understand it.
As you're well below the £40k in 2019/20 you've essentially generated £25k headroom over the next 3 years. Of course 18/19 and 17/18 may have also generated some additional headroom.

Whether or not you're better contributing the savings is another matter entirely and much more difficult to answer without knowing much more about your situation. Age, income, retirement plans, levels of current savings, investments and pensions all play a part in answering that.

there were no prior years as I was in a final salary pension scheme then . thanks for taking time to reply

Mick

Albermarle

aphill24 said:

dunstonh said:

Newnoel said:

The ability to carry forward unused personal allowance from the previous three years is one I would think the chancellor should abolish. It really only benefits the very wealthiest who come in to some sort of windfall

I have used it plenty of times with people who are not the very wealthiest.   It tends to be used more by middle management or company directors who generate wealth and tax revenue.  Company start ups often use it where they plough capital into the business at the start but can then use later earnings to make up for lost pension provision.

Is carry forward easy to do or should I use an IFA. I have just had a redundancy payout and want to use carry forward as I am in the high tax bracket. 

You might get a warning from your pension provider if you go over or are close to the £40K limit , but if you have the ability to carry forward unused allowance from previous years, then  you can basically ignore the warnings .