HMRC carry forward calculator - net or gross contributions?

SMcGill

Hi

I’m trying to use this calculator for the first time and come a bit unstuck. I’ve used carry forward allowance in previous years but never been anywhere near maxing out contributions so it’s not something I’ve monitored closely, but after ‘pension stuffing’ for the last 2 years I think I’m now nearing the limit and I can’t quite see whether to enter gross or net figures for contributions to my Royal London personal pension.

I’m also using the PIA figures that relate to my DB pension in addition to my personal pension contributions - that’s correct, isn’t it?

Dazed_and_C0nfused

Have just tried it and it seems to be gross.

By gross I mean inclusive of any basic rate tax relief added by the pension company, you don't include any personal income tax saving you have benefitted from.

jamesd

Gross, meaning actual value of employer contributions (no added tax relief on them) and value of personal contributions plus 25% to give the basic rate relief if it's to a relief at source scheme. PIA for DB.

SMcGill

Thanks both. Not what I was hoping, but at least I’m clear now. In the figures below from the calculator I’ve estimated my PIA for the whole of 2021/22 and included my gross personal pension contributions so far this financial year - so it looks like I can add about another £5,000 net, yes?

SMcGill

I forgot to add, I’ve taken VS and am due to toddle off into the foothills of retirement at some point in 2022 - the exact date is flexible, so I wondered if there was a good reason to work at least a few weeks into the 2022/23 FY?

hugheskevi

SMcGill said:

Thanks both. Not what I was hoping, but at least I’m clear now. In the figures below from the calculator I’ve estimated my PIA for the whole of 2021/22 and included my gross personal pension contributions so far this financial year - so it looks like I can add about another £5,000 net, yes?

You don't show 2018/19? If you contributed under £40,000 for that year you may have some carry-forward available (although if that is the case, you then need to have figures for 2017/18 and 2016/17 so you can see if the unused amount in 2018/19 is still available, or was used in 2019/20 or 2020/21).

On the figures above and assuming you are not affected by tapered Annual Allowance or Money Purchase Annual Allowance, you could contribute £5,600 net to give £7,000 gross. Making a contribution close to the end of the tax year can help maximise efficiency, once exact figures are known.

I forgot to add, I’ve taken VS and am due to toddle off into the foothills of retirement at some point in 2022 - the exact date is flexible, so I wondered if there was a good reason to work at least a few weeks into the 2022/23 FY?

You may be able to optimise your income tax position,eg if you were not going to have any other taxable income in 2022/23, for example if you were living from ISAs, then working enough into the financial year to use up Personal Allowance would be attractive, or perhaps to work long enough into the financial year to just avoid higher rate tax if you will have other income.

Also, you may benefit from an additional qualifying year for State Pension by working a month or two of the new financial year.

There are also quite a few Bank Holidays in the early part of 2022/23 - working until Monday 6th June would maximise benefit from those.

SMcGill

@Hugheskvi - the screenshot is only the most recent years but yes I did start from 2016/17 so I think it’s accurate.

I’ve got full NI contributions already but I might work until end of May because of the bank holidays as you say and also I will receive 3 salary payments between April 1st and May 31st (as a result of being on a 4 weekly salary cycle). Might as well take advantage of the system one last time!

zagfles

Be careful estimating the PIA of the DB scheme if you're going close to using up all the available AA. It may not be similar to previous years particularly if it's a CARE scheme, as inflation has been variable. The inflation figure used to increase the starting amount for this tax year is only 0.5% (Sept 2020 CPI), your scheme may use a different figure to revalue previous years, if it uses a higher figure then that will also feed into the PIA as well as the extra years' service.

If it's a final salary scheme it's a bit easier to estimate as it's based on your salary - Pru have a calculator here https://www.pruadviser.co.uk/xpf_calculators/defined-benefit-pension-input-tool/ but be careful to look up the definition of pensionable salary (ie what it includes and the period eg average pay over the year)