Carry over allowances

Durged

I have recently been made redundant and have placed £48,000 of the redundancy (after pocketing the £30,000 tax free allowance) into my old DC pension, six weeks later I find myself reemployed on £55,000 a year. I also have £66,000 of unused carry over allowance over the previous 3 years. Due to the redundancy payment I would like to put as much of my new salary into my new pension for tax efficiency purposes . I’ve currently selected a 25% salary sacrifice with my new company but can make AVC’s of up to the remaining 75% taken from net pay. 

Assuming I have no other taxable income (which I pretty much don’t) how much can I place (roughly) into my new pension from my new salary to gain maximum tax relief as I’m really confused about the limits and carry over rules  (i.e the lower of £60,000 or your yearly earning but not if it’s from employer contributions). 

Any assistance would be greatly appreciated as reading online has only confused me more at this point. 

Marcon

Durged said:

I have recently been made redundant and have placed £48,000 of the redundancy (after pocketing the £30,000 tax free allowance) into my old DC pension, six weeks later I find myself reemployed on £55,000 a year. I also have £66,000 of unused carry over allowance over the previous 3 years. Due to the redundancy payment I would like to put as much of my new salary into my new pension for tax efficiency purposes . I’ve currently selected a 25% salary sacrifice with my new company but can make AVC’s of up to the remaining 75% taken from net pay. 

Assuming I have no other taxable income (which I pretty much don’t) how much can I place (roughly) into my new pension from my new salary to gain maximum tax relief as I’m really confused about the limits and carry over rules  (i.e the lower of £60,000 or your yearly earning but not if it’s from employer contributions). 

Any assistance would be greatly appreciated as reading online has only confused me more at this point. 

I wonder if it might be simplest to refer you to one of the online calculators, assuming you've not tried them - eg https://www.hl.co.uk/pensions/contributions/carry-forward-rule/annual-allowance-calculator
or
https://www.gov.uk/guidance/check-if-you-have-unused-annual-allowances-on-your-pension-savings

BTW, if you're doing any googling, the terminology is 'carry forward'. 

NoMore

 (i.e the lower of £60,000 or your yearly earning but not if it’s from employer contributions). 

No such rule but often parroted as one either by websites and organisations that should no better.

There is the Annual Allowance (currently 60k p.a.) which is the maximum amount of contribution from all sources (so employer, third party, yourself) you can make to your pensions in a single year. This can be extended, once this years allowance is used in full, by up to the previous 3 years unused allowances. Going above this will result in a AA charge

There is also the Tax relief limit, which states you are only entitled to tax relief on relief at source (RAS) contributions to a pension up to the amount of your relevant earnings or max of £3600 (£2880 net) if none or below £3600 relevant earnings.

They are two distinct and separate limits with different aims and rules. You need to consider them both separately to determine your maximum available contributions. 

I don't think you have given us enough information to work out for you your max contribution and keeping within AA and tax relief, as we don't know the your amount of relevant earnings for the full year (so including the earnings from your previous job and the amount of redundancy). At a quick estimate on only your current salary, because your 55k job is going to be only for 9 months and your salary sacrificing 25%, then that will give you ~£23k of earnings this year. So with an unused AA of ~£49k (after your salary sacrifice taken into account) putting ~£18.4k net (~23k Gross) into a pension will keep you below both the Tax relief limit, and well within your AA carry forward. However as you have earned more, your likely to be able to put in even more for the Tax relief, but as I said we don't know your earnings in total for the year.

Basically you could put all of your net pay from your new job into a Pension and still be under the AA. This is assuming you have calculated both your carry forward allowance and how much AA you have used so far correctly,.

Veteransaver

Note the £60k annual allowance was only from 23-24 tax year. Prior years was £40k

Durged

 Brilliant thanks to you and Macon for the calculators and the effort to work this out for me with the details given I think I’m confident I could put my whole salary into my pension for this tax year.

Thanks again it’s really appreciated. 

sandsy

Durged said:

I have recently been made redundant and have placed £48,000 of the redundancy (after pocketing the £30,000 tax free allowance) into my old DC pension

To be clear, you made a personal contribution of £48k this tax year? And received £12k tax relief making a gross contribution of £60k? Or was the £48k facilitated as an employer contribution?