Carry over pension allowance

NOVAMET21

Hi

I read that we can carry over pension allowance from the previous 3 years. Is that correct?

If my pension contribution was £20k each year for the previous 3 years, does that mean I can contribute up to £40k plus 3 x £20k = £100k this year?

Can I also ask my employer to put the bonus to pensions directly?

Thanks

Dazed_and_C0nfused

How much do you expect to earn in the current tax year?

Bimbly

Your contribution limit this year is your earned income (salary).

If you "only" earn £40k this year, you still cannot put more than £40k into your pension, despite unused allowance from previous years which could be carried forward.
 

NOVAMET21

Bimbly said:

Your contribution limit this year is your earned income (salary).

If you "only" earn £40k this year, you still cannot put more than £40k into your pension, despite unused allowance from previous years which could be carried forward.
 

If more than 40k earned income then can we unused allowance and don't have to pay tax?

NedS

NOVAMET21 said:

Bimbly said:

Your contribution limit this year is your earned income (salary).

If you "only" earn £40k this year, you still cannot put more than £40k into your pension, despite unused allowance from previous years which could be carried forward.
 

If more than 40k earned income then can we unused allowance and don't have to pay tax?

There are two separate limits, and you MUST adhere to both, independently:

1. You cannot contribute more to a pension than you earn in the year

2. You are limited by the £40k annual allowance.

You can carry forward unused annual allowance from the 3 previous tax years to increase your contributions under (2), so long as you do not breech (1) and those contributions are still covered by relevant earnings.

Dazed_and_C0nfused

NOVAMET21 said:

Bimbly said:

Your contribution limit this year is your earned income (salary).

If you "only" earn £40k this year, you still cannot put more than £40k into your pension, despite unused allowance from previous years which could be carried forward.
 

If more than 40k earned income then can we unused allowance and don't have to pay tax?

Most pension contributions don't stop you paying tax, they have different benefits.

What exactly do you mean by this?

And what method will you be paying the contributions under,

Net pay

Relief at source

Salary sacrifice 

NOVAMET21

Dazed_and_C0nfused said:

NOVAMET21 said:

Bimbly said:

Your contribution limit this year is your earned income (salary).

If you "only" earn £40k this year, you still cannot put more than £40k into your pension, despite unused allowance from previous years which could be carried forward.
 

If more than 40k earned income then can we unused allowance and don't have to pay tax?

Most pension contributions don't stop you paying tax, they have different benefits.

What exactly do you mean by this?

And what method will you be paying the contributions under,

Net pay

Relief at source

Salary sacrifice 

Salary sacrifice

I m expected to earn a lot more this year due to qtrly bonuses and annual bonuses. 

I read that after 40k allowance, if we put more then we don't get tax relief and it becomes Taxable income but then yesterday saw an article about the carrying over the previous unused allowances.

NOVAMET21

NedS said:

NOVAMET21 said:

Bimbly said:

Your contribution limit this year is your earned income (salary).

If you "only" earn £40k this year, you still cannot put more than £40k into your pension, despite unused allowance from previous years which could be carried forward.
 

If more than 40k earned income then can we unused allowance and don't have to pay tax?

There are two separate limits, and you MUST adhere to both, independently:

1. You cannot contribute more to a pension than you earn in the year

2. You are limited by the £40k annual allowance.

You can carry forward unused annual allowance from the 3 previous tax years to increase your contributions under (2), so long as you do not breech (1) and those contributions are still covered by relevant earnings.

Thanks you.

1 is tick and 2 is most likely due to bonuses which I want to put into pensions.

Only thing is will the carry forward happens automatically? I mean if the 40k allowance is exceeded then the payroll system know to use previous years allowance and keep providing tax relief?

Dazed_and_C0nfused

You don't get pension tax relief with salary sacrifice as you aren't contributing to the pension.

You are agreeing to a lower salary in return for your employer contributing more to your pension.

As these are employer contributions you don't get the 25% added by the pension company like you would with RAS contributions.

But you don't have the income to be taxed in the first place so avoid paying income tax and National Insurance on the amount sacrificed.

So for most people they are more tax efficient than other methods of getting money into your pension.

It is your responsibility to keep records of the amount that goes into your pension and details of the carry forward used in case HMRC ask for this.  But there is nothing you have to do to use carry forward in the first place.

NOVAMET21

Dazed_and_C0nfused said:

You don't get pension tax relief with salary sacrifice as you aren't contributing to the pension.

You are agreeing to a lower salary in return for your employer contributing more to your pension.

As these are employer contributions you don't get the 25% added by the pension company like you would with RAS contributions.

But you don't have the income to be taxed in the first place so avoid payrolled mg income tax and National Insurance on the amount sacrificed.

So for most people they are more tax efficient than other methods of getting money into your pension.

It is your responsibility to keep records of the amount that goes into your pension and details of the carry forward used in case HMRC ask for this.  But there is nothing you have to do to use carry forward in the first place.

Thank you.

Albermarle

You are not allowed to salary sacrifice below the National Minimum Wage. So you can not salary sacrifice down to zero income.