Pension carry forward calculation

MichaelClark_

Hi, this is my first post so hello everyone 

I have put too much money into my pension this year and have a question about pension carry forward. 

By the end of this tax year (2020/2021) I will have contributed £33K pre tax relief.  This includes personal and employer contributions.  I'm at the higher rate of income tax in Scotland so I'm paying 41%. 

I did a bit of fiddling with this tool:  hl[dot]co[dot]uk/pensions/tax-relief/calculator .  If I claim the higher rate tax relief on the £33K it says my pension would be about £61,000 after everything is claimed.  That would mean I need to make up for £21K over the £40K allowance.

Annual allowance is 100% of income or 40K - whatever is lower.  So for the last 3 years I'll list my incomes and how much I've taken from the allowance:

My Income by tax year

Tax Year	Gross Income	Annual Allowance
2017-2018	£45,000	£40,000 - £15K that I contributed = £25K
2018-2019	£23,400	£23,400 - £3K that I contributed = £20K
2019-2020	£8,628	£8,628 - no contributions made = £8,628
2020-2021	£130K	£40,000

The reason the income is low in 2018-2019 and 2019-2020 is I started a ltd company in 2017 and was taking dividends.

So assuming the above info, I will have £25K + £20K + £8,628 = £53,628 available to be carried forward.  That's more than enough to cover the £21K I have over this years allowance.

Does anyone see any holes/miscalculations in my understanding?  I'm having to learn all this as I go and I'm not very well versed in it. 

Any input would be very much appreciated.

Thanks,
Michael

Dazed_and_C0nfused

You don't include personal tax relief in the calculation.

Are all your personal contributions "relief at source"?

MichaelClark_

Dazed_and_C0nfused said:

You don't include personal tax relief in the calculation.

Are all your personal contributions "relief at source"?

Yeah, I have one PensionBee pension which tops me up 25% when I contribute.  I also have a NEST pension which gives me 20%.

Dazed_and_C0nfused

I think you have misunderstood.

There is only a single rate for relief at source.  This is a 25% addition by the pension company which equates to 20% tax relief i.e. you contribute £2,000 and the pension company adds £500.  £2,500 x 20% = £500.

I don't see how you can get £33k to become £61k.  Even if it was all a personal contribution then that takes £33k to £41,250.  A long way short of £61k.

Might be worth starting again or providing more information about how you arrive at £61k.

MichaelClark_

Dazed_and_C0nfused said:

I don't see how you can get £33k to become £61k.  Even if it was all a personal contribution then that takes £33k to £41,250.  A long way short of £61k.

I agree - I've misunderstood.  I thought that number was huge when I saw it, it was from the tool on the website I tried to link.  

Lets forget that number and pretend that never happened.   

I'm trying to work out how much I've gone over my allowance.  

I've contributed 30K into my PensionBee and received a total of £7,500 back from the topup (basic rate).
My NEST pension currently has £2600 in it from total contributions.  That includes basic rate tax relief of £330 according to the portal.

My understanding is the annual allowance includes all tax relief claimed.  I'll have to claim the higher rate tax on the contributions so it's going to end up more than the £37500 + £3K. 

Can you help me figure out how much I've gone over the allowance?

Dazed_and_C0nfused

The annual allowance does not include all tax relief, only the basic rate tax relief added by the pension company.

It sounds like you have contributed £39,150 gross so far.  Plus £950 employer contribution making a total of £40,100.

What do you expect the total contributions between now and 5 April 2021 to be?

MichaelClark_

Dazed_and_C0nfused said:

The annual allowance does not include all tax relief, only the basic rate tax relief added by the pension company.

Ahh so that was a missing puzzle piece.  I had read that it included tax relief - I assumed it meant all tax relief.  Thanks for that, that makes it much easier.

So it's £37,500 + whatever will be in the NEST pension by April.  

The Nest pension has been going since June and has £2,600 so a rough estimate for the end of tax year would be £4K.  That brings me to a total of £41,500.  I'm only £1,500 over the allowance.  

Assuming the pension carry forward works as I'm expecting It'll more than cover the £1,500. 

Thanks for all this help, I'd have been up the wrong tree if not for your info.

Albermarle

I had read that it included tax relief - I assumed it meant all tax relief. 

It only includes tax relief that directly ends up in your pension.