Pension 40K limit per year

Pat38493

Hi - quick and hoepfully simple question. Does the 40K limit on pension contributions per year on my income apply to just my contributions or the total including any employer contributions? The gov.uk website doesn't seem to specify this.

QrizB

total including any employer contributions

^ this....

NedS

Unless it's a DB pension, and then it's based on the pension input amount (the increase in value of benefits x 16) and not any amounts that have been 'contributed' to the scheme during the year.

Do you have DC pension, a DB pension or a combination of both for the year?

Pat38493

QrizB said:

total including any employer contributions

^ this....

This is what I thought but I just wanted to double check as it's not too clear from some of the web sites - it is a DC pension I am talking about where I want to know what is the maximum amount that I can put in during the tax year.

Also - what happens if I exceed it?  For example if I accidently put in £41K, does this just mean I have to pay tax now on the extra 1K at my marginal rate?

QrizB

Pat38493 said:

Also - what happens if I exceed it?  For example if I accidently put in £41K, does this just mean I have to pay tax now on the extra 1K at my marginal rate?

Yes; you're treated as havign had £1000 extra taxable earnings.
Here's an explanation from Aberdeen abrdn (fortunately with vowels included):
https://techzone.abrdn.com/anon/public/pensions/guide-pension-annual-allowance#anchor_8

Pat38493

QrizB said:

Pat38493 said:

Also - what happens if I exceed it?  For example if I accidently put in £41K, does this just mean I have to pay tax now on the extra 1K at my marginal rate?

Yes; you're treated as havign had £1000 extra taxable earnings.
Here's an explanation from Aberdeen abrdn (fortunately with vowels included):
https://techzone.abrdn.com/anon/public/pensions/guide-pension-annual-allowance#anchor_8

Thanks - also in this document it implies that if I didn't put £40K in during the previous 3 tax years, I can carry that forward?

So for example if in the last 3 years I put 10K in, then theoretically (other conditions satisfied) I could put in £130000 and still get tax relief in this tax year?

Also - from what I understood in your linked document, it's up to me personally to track this and declare any excess on my tax return?

QrizB

Pat38493 said:

QrizB said:

Pat38493 said:

Also - what happens if I exceed it?  For example if I accidently put in £41K, does this just mean I have to pay tax now on the extra 1K at my marginal rate?

Yes; you're treated as havign had £1000 extra taxable earnings.
Here's an explanation from Aberdeen abrdn (fortunately with vowels included):
https://techzone.abrdn.com/anon/public/pensions/guide-pension-annual-allowance#anchor_8

Thanks - also in this document it implies that if I didn't put £40K in during the previous 3 tax years, I can carry that forward?
So for example if in the last 3 years I put 10K in, then theoretically (other conditions satisfied) I could put in £130000 and still get tax relief in this tax year?

Yes, (as you note, there are other conditions).

Pat38493 said:

Also - from what I understood in your linked document, it's up to me personally to track this and declare any excess on my tax return?

Yes, otherwise HMRC will eventually notice and you'll have charges to pay too.

NedS

QrizB said:

Pat38493 said:

Also - from what I understood in your linked document, it's up to me personally to track this and declare any excess on my tax return?

Yes, otherwise HMRC will eventually notice and you'll have charges to pay too.

Yes, as individuals were are all personally responsible for paying our own taxes. HMRC exist to collect those taxes from us. It is not their responsibility to ensure we pay the right amount of tax.

Pat38493

NedS said:

QrizB said:

Pat38493 said:

Also - from what I understood in your linked document, it's up to me personally to track this and declare any excess on my tax return?

Yes, otherwise HMRC will eventually notice and you'll have charges to pay too.

Yes, as individuals were are all personally responsible for paying our own taxes. HMRC exist to collect those taxes from us. It is not their responsibility to ensure we pay the right amount of tax.

OK and do I have to declare on my tax return that I have made use of roll over pension allowances or I only have to declare something if I have an real Excess to report?

Dazed_and_C0nfused

If it's one of the types that need declaring then you have to declare the contribution.

You don't have to explain anything about using carry forward but should retain your own workings in case HMRC ask any questions.

You would have to declare an annual allowance charge if you exceed the limits.

Pat38493

Dazed_and_C0nfused said:

If it's one of the types that need declaring then you have to declare the contribution.

You don't have to explain anything about using carry forward but should retain your own workings in case HMRC ask any questions.

You would have to declare an annual allowance charge if you exceed the limits.

OK thanks and out of interest, is there any valid reason why someone would carry on paying in above their available allowance?

for example thinking about it, if I’m paying in through a salary sacrifice scheme, would I still avoid paying the NI on those contributions even though I will still have to pay the income tax?