Help with Salary Sacrifice! Carrying over my Annual Allowance from previous years

C4rlos12345678

Good Afternoon Forumites, 

I currently Salary sacrifice into a SIPP.
I just need some clarification (and if needed to plan ahead) when carrying over the unused Annual Allowance (currently at £60000) into the new tax year. 
To explain with some simple numbers:

In Year 2023/24, out of my initial £100,000 salary, I salary sacrificed £40.000 , making my P60 amount £60,000
So in Year 2024/25, still on £100,000, can I sacrifice £60,000 + unused £20,000 from the previous year? (assuming the £20,000 left is above the minimum wage?)

And if so, how does HMRC (and one's employer) determine this annual 'overpayment' is indeed carried over from the previous year? Do I need to fill any forms at any point?

Many thanks in advance

Albermarle

Can you clarify if there are any employer payments into the pension, as they count towards the annual allowance as well?

Yorkshire_Dangermouse

Is your employer also making contributions to your pension, as if so those will also count towards the £60k.

Grumpy_chap

C4rlos12345678 said:

Good Afternoon Forumites, 

I currently Salary sacrifice into a SIPP.
I just need some clarification (and if needed to plan ahead) when carrying over the unused Annual Allowance (currently at £60000) into the new tax year. 
To explain with some simple numbers:

In Year 2023/24, out of my initial £100,000 salary, I salary sacrificed £40.000 , making my P60 amount £60,000
So in Year 2024/25, still on £100,000, can I sacrifice £60,000 + unused £20,000 from the previous year? (assuming the £20,000 left is above the minimum wage?)

And if so, how does HMRC (and one's employer) determine this annual 'overpayment' is indeed carried over from the previous year? Do I need to fill any forms at any point?

Many thanks in advance

You cannot make this assessment on the basis of only two years' figures.  You need to consider four years in total.

• In TY 2024-25, you have to use all of that years AA first before carry-forward can be considered.
• Carry forward then starts from the oldest available, which is a maximum of three years, so 2021-22 
• Then any available from 2022-23
• Then any available from 2023-24

C4rlos12345678

Grumpy_chap THanks for your reply. And apologies if not clear. I only opened my SIPP in the 2023/24 tax year so am I correct in assuming the 2023/24 year is the oldest available (even though I have a NEST account for auto-enrolment since 2020?)

So to re-phrase, can I use the whole of £60,000 (2024/25) and then start using the £20,000 (2023/24)? And if so, are there any forms to fill to inform HMRC / course of action to take? 

Marcon

C4rlos12345678 said:

Grumpy_chap Apologies if not clear. I only opened my SIPP in the 2023/24 tax year so I am correct in assuming the 2023/24 year is the oldest available? Even though I have a NEST account for auto-enrolment since 2020?

No, not correct. You must have been a member of a UK-registered pension scheme in each of the tax years from which you wish to carry forward - and you were.

Whether you want to make the bumper payment to your SIPP, NEST or a completely new scheme doesn't matter.

C4rlos12345678

Albermarle 
Yorkshire_Dangermouse 

Thanks for your replies.

Yes my employer makes the auto-enrolment contributions and so do I (NEST).
I am aware these both count towards the AA (including the automatic 20% tax relief - relief at source amounts) as does the portion of the saved 3.5% erNI passed to my SIPP provider by my employer (Salary Sacrifice amounts). 

Grumpy_chap

C4rlos12345678 said:

Grumpy_chap THanks for your reply. And apologies if not clear. I only opened my SIPP in the 2023/24 tax year so am I correct in assuming the 2023/24 year is the oldest available (even though I have a NEST account for auto-enrolment since 2020?)

So to re-phrase, can I use the whole of £60,000 (2024/25) and then start using the £20,000 (2023/24)? And if so, are there any forms to fill to inform HMRC / course of action to take? 

Aaah - yes, that is the often forgotten rule about carry forward.  You must have been a member of a pension scheme in the year from which you are claiming carry forward.

AIUI - but really hope someone will positively confirm - you are a member of a pension scheme if you have employer pension.  That seems to be what is indicated here:
https://www.moneyhelper.org.uk/en/pensions-and-retirement/tax-and-pensions/carry-forward

Marcon

Grumpy_chap said:

C4rlos12345678 said:

Grumpy_chap THanks for your reply. And apologies if not clear. I only opened my SIPP in the 2023/24 tax year so am I correct in assuming the 2023/24 year is the oldest available (even though I have a NEST account for auto-enrolment since 2020?)

So to re-phrase, can I use the whole of £60,000 (2024/25) and then start using the £20,000 (2023/24)? And if so, are there any forms to fill to inform HMRC / course of action to take? 

Aaah - yes, that is the often forgotten rule about carry forward.  You must have been a member of a pension scheme in the year from which you are claiming carry forward.

AIUI - but really hope someone will positively confirm - you are a member of a pension scheme if you have employer pension.  That seems to be what is indicated here:
https://www.moneyhelper.org.uk/en/pensions-and-retirement/tax-and-pensions/carry-forward

I already have confirmed:

Marcon said:

C4rlos12345678 said:

Grumpy_chap Apologies if not clear. I only opened my SIPP in the 2023/24 tax year so I am correct in assuming the 2023/24 year is the oldest available? Even though I have a NEST account for auto-enrolment since 2020?

No, not correct. You must have been a member of a UK-registered pension scheme in each of the tax years from which you wish to carry forward - and you were.

You don't need to be contributing to the scheme question; you just need to be a member of it, so NEST fits the bill.

C4rlos12345678

Marcon
Grumpy_chap 

Many thanks - Much appreciated. Great that NEST counts.
Last questions please. Do I have to inform anyone about going over (or planning to go over) i.e. HMRC and/or Employer?

And how is using past allowances reconciled ?

C4rlos12345678

Just came across this - a useful link to an HMRC Calculator on how much AA you can carry forward:

https://www.gov.uk/guidance/check-if-you-have-unused-annual-allowances-on-your-pension-savings