Can you still use Carry Forward?

kerrick

With carry forward you can fill unused contribution capacity (up to £40,000) for the 3 previous years, if you had a pension in place during those 3 years. You must start by filling the current year and then you can top-up the oldest 3 years prior, then the 2nd, then the previous in that order. So current, 3rd, 2nd, previous.

So if you open your pension this year 2021/22, you will not have any carry forward available until 2024/25 (3 years time). At that point the order for filling unused allowance will be 2024/5, 2021/22, 2022/23, 2023/24.

If in 2022/23 you filled that year, then in 2024/25 after filling 2024/25 would you be able to go back and top-up 2021/22 because it is within 3 years, even though a later year 2022/23 is already filled?

In any given year, if you fill the current year, and also fill the earliest available, can you also partially fill the 2nd previous, and then fill the 2nd previous next year? In other words so long as there is unused capacity within 3 years prior, can you fill an available year in 2 payments made in 2 tax periods?

I would think the answers are 'yes' in both situations, is it?

Marcon

kerrick said:

With carry forward you can fill unused contribution capacity (up to £40,000) for the 3 previous years, if you had a pension in place during those 3 years. You must start by filling the current year and then you can top-up the oldest 3 years prior, then the 2nd, then the previous in that order. So current, 3rd, 2nd, previous.

So if you open your pension this year 2021/22, you will not have any carry forward available until 2024/25 (3 years time). At that point the order for filling unused allowance will be 2024/5, 2021/22, 2022/23, 2023/24.

If in 2022/23 you filled that year, then in 2024/25 after filling 2024/25 would you be able to go back and top-up 2021/22 because it is within 3 years, even though a later year 2022/23 is already filled?

In any given year, if you fill the current year, and also fill the earliest available, can you also partially fill the 2nd previous, and then fill the 2nd previous next year? In other words so long as there is unused capacity within 3 years prior, can you fill an available year in 2 payments made in 2 tax periods?

I would think the answers are 'yes' in both situations, is it?

Good explanation here https://retirement.fidelity.co.uk/grow-and-manage-your-pension/pension-allowances-tax-benefits/carry-forward/ (download the guide offered, which should answer all your questions and more!).

NedS

kerrick said:

With carry forward you can fill unused contribution capacity (up to £40,000) for the 3 previous years, if you had a pension in place during those 3 years. You must start by filling the current year and then you can top-up the oldest 3 years prior, then the 2nd, then the previous in that order. So current, 3rd, 2nd, previous.

So if you open your pension this year 2021/22, you will not have any carry forward available until 2024/25 (3 years time). At that point the order for filling unused allowance will be 2024/5, 2021/22, 2022/23, 2023/24.

No, you will have carry forward available totalling any unused allowances from the previous 3 tax years.

Did you have any sort of pension prior to 2021/22? If so, then carry forward may be available.

kerrick said:

If in 2022/23 you filled that year, then in 2024/25 after filling 2024/25 would you be able to go back and top-up 2021/22 because it is within 3 years, even though a later year 2022/23 is already filled?

You are not "topping up" previous years, but rather carrying forward any unused allowance from the past 3 years to the current year if required.

kerrick said:

In any given year, if you fill the current year, and also fill the earliest available, can you also partially fill the 2nd previous, and then fill the 2nd previous next year? In other words so long as there is unused capacity within 3 years prior, can you fill an available year in 2 payments made in 2 tax periods?

Yes, you can use all of the carry forward available from the previous 3 tax years in the current year. You are not limited to only using that from 3 years ago - but you would use the oldest first, from 3 years ago, as next year it will no longer be available to you as it would now be outside of the last 3 years.

Dazed_and_C0nfused

If in 2022/23 you filled that year, then in 2024/25 after filling 2024/25 would you be able to go back and top-up 2021/22 because it is within 3 years, even though a later year 2022/23 is already filled?

You can never make contributions for a previous tax year. 

Carry forward can mean you can make additional contributions in the current tax year, it doesn't give you the ability to make contributions in respect of a tax year that has ended.

kerrick

The bit about not being able to make contributions to a year that has ended confuses me. Isn't the point of carry forward about the option to make contributions to previous years where less than the maximum allowed has been already paid in?

So in this situation, contributions already made:
This year: £0
Previous year: £0
2 Years prior: £40000
3 Years prior: £20000

In the above can you now add £40000 to This year, and £20000 to 3 Years prior?

Pat38493

kerrick said:

The bit about not being able to make contributions to a year that has ended confuses me. Isn't the point of carry forward about the option to make contributions to previous years where less than the maximum allowed has been already paid in?

So in this situation, contributions already made:
This year: £0
Previous year: £0
2 Years prior: £40000
3 Years prior: £20000

In the above can you now add £40000 to This year, and £20000 to 3 Years prior? 

As far as I know you could pay £100,000 into your pension this year (assuming you have sufficient income to do that as you can’t pay in more than your income).

You have £20000 rollover from 3 years prior, £40,000 from last year, and your £40,000 allowance this year.

Technically though you are not paying last year’s allowance late, you are allowed to pay more this year because you didn’t last year.  However you would still count it against this year’s income.

Dazed_and_C0nfused

kerrick said:

The bit about not being able to make contributions to a year that has ended confuses me. Isn't the point of carry forward about the option to make contributions to previous years where less than the maximum allowed has been already paid in?

So in this situation, contributions already made:
This year: £0
Previous year: £0
2 Years prior: £40000
3 Years prior: £20000

In the above can you now add £40000 to This year, and £20000 to 3 Years prior?

No, it's the exact opposite of that.

You can never make payments for a tax year once it has ended.

Carry forward means you can, when you have sufficient earnings, pay more than the normal £40k annual allowance limit in the current tax year.

It is a current year contribution and any tax benefit is based on the tax position for the current tax year.

kerrick

Pat, so is that 'yes' for the situation above? If your company can pay £60k, it pays in 40k in the current year and 20k in 3 years prior? That fills years current, and 3, and 2 was already full, leaving only previous year empty.

I don't know about 100k, everything I read and other posts on here say the limit is £40k carry forward for company director contributions for each year.

Pat38493

kerrick said:

Pat, so is that 'yes' for the situation above? If your company can pay £60k, it pays in 40k in the current year and 20k in 3 years prior? That fills years current, and 3, and 2 was already full, leaving only previous year empty.

I don't know about 100k, everything I read and other posts on here say the limit is £40k carry forward for company director contributions for each year.

To be honest I am not sure how it works with director contributions made by the company.  I just know that if you are an employee, you would be able to contribute 40k of your income in that year, plus any remaining rollover for the prior 3 years, so in the situation you describe your could theoretically contribute 100k and that would use up your current year allowance plus your remaining rollover from the 3rd year prior plus your entire allowance from last year that was never used.  

That includes any money paid by you from your salary and any paid directly by the company.

However to do that as an employee you would need at least 100k of salary income paid to you as you can only pay up to your current tax year income into the pension.  There is nothing to stop you paying 100% of your salary into your pension other than possible starvation.  I do not know if there are special rules for directors.

So yes if you wanted to pay 60k it would be the 40k current year then the 20k from the 3rd year prior.  You could then roll over the 40k from last year into next year yes.

zagfles

It's carry forwards, not carry back! You do not "fill previous years", but you can (subject to conditions) carry forwards unused allowance from previous years.

If you started a pension in 2021/22 and had no pension before that, then this tax year 2022/23 you can carry forwards from 2021/22 but not previous years as you weren't in a pension scheme in previous years. So if you paid in £10k (inc tax relief) in 2021/22, you can carry forwards £30k to 2022/23 and so your available AA this year is £70k.

Any contributions you make this year count as this year's contributions for tax purposes, and also for the tax relief limit of 100% of earnings (this is a separate limit with different rules, eg no carry forwards).

If this year you only put in (say) another £10k, then next tax year you'll have an available AA of £100k (£40k plus 2x£30k carry forwards).

Or use an AA calculator like https://www.hl.co.uk/pensions/contributions/carry-forward-rule/annual-allowance-calculator

Grumpy_chap

Pat38493 said:

kerrick said:

Pat, so is that 'yes' for the situation above? If your company can pay £60k, it pays in 40k in the current year and 20k in 3 years prior? That fills years current, and 3, and 2 was already full, leaving only previous year empty.

I don't know about 100k, everything I read and other posts on here say the limit is £40k carry forward for company director contributions for each year.

To be honest I am not sure how it works with director contributions made by the company.  I just know that if you are an employee, you would be able to contribute 40k of your income in that year, plus any remaining rollover for the prior 3 years, so in the situation you describe your could theoretically contribute 100k and that would use up your current year allowance plus your remaining rollover from the 3rd year prior plus your entire allowance from last year that was never used.  

That includes any money paid by you from your salary and any paid directly by the company.

However to do that as an employee you would need at least 100k of salary income paid to you as you can only pay up to your current tax year income into the pension.  There is nothing to stop you paying 100% of your salary into your pension other than possible starvation.  I do not know if there are special rules for directors.

So yes if you wanted to pay 60k it would be the 40k current year then the 20k from the 3rd year prior.  You could then roll over the 40k from last year into next year yes.

An employee is limited to 100% of salary plus the £40k annual limit (with carry-forward if appropriate).

Company contributions are not limited by the salary (as they are made outside of salary) but the annual allowance limits (£40k plus carry-forward if available) still apply.

For an owner-Director, the company can make the contributions and the salary restriction does not then apply.