Pension Tax relief on carry forward with no relevant earnings

york1_2

Wondered if anyone could give a view on the following;
- I have a spouses pension which takes up my tax free allowance
- I have no relevant earnings, but understand I can contribute £3600 (incl basic tax relief) into my own DC pension
- I have taken tax free cash from my pension, but recycling won't apply (I have checked the rules), but have not taken any drawdown etc from the pot.
- I have not contributed to my pension since 2019/2020 tax year
- I understand carry forward can be applied to 3 previous tax years
- Due to high interest rates and dividend income, for the last 2 years I have paid higher rate tax (ISA's have been maxed out each year)

So, based on the above can I make the £3600 payment (incl basic tax relief) for the previous 3 years using carry forward rules, and also claim higher rate tax relief for the last 2 years on these contributions.  I can only find examples using earned income, whereas bank interest and dividend income has pushed me into the higher tax bracket (temporarily whilst interest rates are high) and it's not clear if this is treated the same for tax relief...

Apologies for the wordy nature but I have tried to summarise....    

Many thanks in advance for any information.

zagfles

No. Carry forwards applies to the annual allowance, not the tax relief limit. If you have no relevant earnings then £3600 (incl basic tax relief)  is your limit. So £2880 net
See PTM044100 - Contributions: tax relief for members: conditions - HMRC internal manual - GOV.UK (www.gov.uk)

BoGoF

You couldn't be any more wrong.

£3600 is the max in your circumstance.

Dazed_and_C0nfused

york1_2 said:

Wondered if anyone could give a view on the following;
- I have a spouses pension which takes up my tax free allowance
- I have no relevant earnings, but understand I can contribute £3600 (incl basic tax relief) into my own DC pension
- I have taken tax free cash from my pension, but recycling won't apply (I have checked the rules), but have not taken any drawdown etc from the pot.
- I have not contributed to my pension since 2019/2020 tax year
- I understand carry forward can be applied to 3 previous tax years
- Due to high interest rates and dividend income, for the last 2 years I have paid higher rate tax (ISA's have been maxed out each year)

So, based on the above can I make the £3600 payment (incl basic tax relief) for the previous 3 years using carry forward rules, and also claim higher rate tax relief for the last 2 years on these contributions.  I can only find examples using earned income, whereas bank interest and dividend income has pushed me into the higher tax bracket (temporarily whilst interest rates are high) and it's not clear if this is treated the same for tax relief...

Apologies for the wordy nature but I have tried to summarise....    

Many thanks in advance for any information.

You can't use carry forward until you have used your current tax years annual allowance.

As this is £60k and you can only contribute £3,600 (gross) this isn't an option for you.

Also, you can only ever get tax relief for the tax you contribute in, so even if you could contribute more than £3,600 the tax relief will relate to this year, what happened in previous tax years is irrelevant.

You can get higher rate relief against interest and dividends but only on the £3,600 you are eligible to contribute.

york1_2

Many thanks for the information.  I had assumed I was only eligible for the £3600 grossin 2023/24 (plus higher rate relief) , but wanted to check if there was any way to use unused years contributions against tax relief but looks like that's not an option.

Albermarle

york1_2 said:

Many thanks for the information.  I had assumed I was only eligible for the £3600 grossin 2023/24 (plus higher rate relief) , but wanted to check if there was any way to use unused years contributions against tax relief but looks like that's not an option.

You have misinterpreted/misunderstood the carry forward rule. However you can take comfort from the fact that it is widely misunderstood and the issue crops up often on this forum.

abitpedantic

Dazed_and_C0nfused said:

york1_2 said:

Wondered if anyone could give a view on the following;
- I have a spouses pension which takes up my tax free allowance
- I have no relevant earnings, but understand I can contribute £3600 (incl basic tax relief) into my own DC pension
- I have taken tax free cash from my pension, but recycling won't apply (I have checked the rules), but have not taken any drawdown etc from the pot.
- I have not contributed to my pension since 2019/2020 tax year
- I understand carry forward can be applied to 3 previous tax years
- Due to high interest rates and dividend income, for the last 2 years I have paid higher rate tax (ISA's have been maxed out each year)

So, based on the above can I make the £3600 payment (incl basic tax relief) for the previous 3 years using carry forward rules, and also claim higher rate tax relief for the last 2 years on these contributions.  I can only find examples using earned income, whereas bank interest and dividend income has pushed me into the higher tax bracket (temporarily whilst interest rates are high) and it's not clear if this is treated the same for tax relief...

Apologies for the wordy nature but I have tried to summarise....    

Many thanks in advance for any information.

You can't use carry forward until you have used your current tax years annual allowance.

As this is £60k and you can only contribute £3,600 (gross) this isn't an option for you.

Also, you can only ever get tax relief for the tax you contribute in, so even if you could contribute more than £3,600 the tax relief will relate to this year, what happened in previous tax years is irrelevant.

You can get higher rate relief against interest and dividends but only on the £3,600 you are eligible to contribute.

Tax relief against interest and dividends - that’s interesting! I'd be grateful if you could clarify via an example. If I have £1500 excess income (above the £50270 threshold) and £1000 excess savings interest, both taxed at 40% and £1000 excess dividends taxed at 33.75% but I contribute £3600 to a SIPP (of which the provider has reclaimed £720 from HMRC), how much additional tax rebate can I expect?