Carry Forward

P933alilli

I wondered if you can use carry forward on DC pensions even if you no longer work? I gather that it can only be used for the previous three years once the current years contributions have been made. I presume it refers to the current tax year? I increased the contributions to £240 per month in january after previously only contributing a measly £40 per month. The DC with profits pension performed much better than i expected last year so If carry forward is permitted, and the pension continues to do well, the only downside i can see is that it would be even more difficult to drawdown without incurring a big tax bill each year when my state pension kicks in in another 7 years or so.

Albermarle

If you no longer work then the maximum you can add as a non earner is £2880 pa ( and £720 of tax relief will be added) . Carry forward is only relevant if you have sufficient  earned income in this tax year to make use of it.

P933alilli

Ok, thanks Albermarle, looks like i got the wrong end of the stick again!

dunstonh

I wondered if you can use carry forward on DC pensions even if you no longer work?

Yes.  As long as you have income from employment/self-employment in that tax year.  e.g. worked until November.  You then have until 5th April to pay into the pension with that years earnings taken into account.

If you have no earned income in this tax year, then as albermarle says, its a no go.  If you earn less than £40k in this tax year, its a no go.

 I gather that it can only be used for the previous three years once the current years contributions have been made. I presume it refers to the current tax year?

Yes.  You have to use the £40,000 available this tax year (unless tapering applies and that is reduced) before you can go back three years to use unused allowances.   Your earned income needs to be able to support the contribution.

 the only downside i can see is that it would be even more difficult to drawdown without incurring a big tax bill each year when my state pension kicks in in another 7 years or so.

Only an issue if you were a basic rate taxpayer at the point of contributing but a higher rate tax payer when drawing it out.   If you were basic or higher whilst working,  and basic whilst drawing, then you are still better off.