Pension Carry Forward

Sarahspangles

GlasgowExpat2 said:

Dazed_and_C0nfused said:

GlasgowExpat2 said:

wjr4 said:

How much is your gross income?

Salary is £30k.  I also have rental income, assume that wouldn’t count?

Where does using unused annual allowance from previous years come into it then?

You have still got £30k of this year's allowance (less any employer contributions) to use before carry forward is relevant.

I’m in the process of selling my BTL so was going to put some of the proceeds into my pension (I’m 60 and looking to retire in 2-3 years)

There are two limits, the relevant one is your taxable income each tax year. If you will have taxable income (from employment) in two further tax years you can get quite a lot into a pension. Once you retire you can still contribute £2880 and will get 20% tax relief.

The other limit, Annual Allowance, has been £40,000 as recently as 2022/23 so if that is reduced at any point you may need to check you stay within that limit too.

The other thing to watch if you are going to have a capital receipt, is tax on savings interest. 5% interest on £20,000 should be covered by your Personal Savings Allowance but you will be taxed at 20% on everything over that. You could start to move any existing savings into ISAs by the end of this tax year, and premium bonds can be useful to hold cash until you can get anorher chunk into a new tax year’s ISA. But you need to check if the ISA rates make them worthwhile.

GlasgowExpat2

Sarahspangles said:

GlasgowExpat2 said:

Dazed_and_C0nfused said:

GlasgowExpat2 said:

wjr4 said:

How much is your gross income?

Salary is £30k.  I also have rental income, assume that wouldn’t count?

Where does using unused annual allowance from previous years come into it then?

You have still got £30k of this year's allowance (less any employer contributions) to use before carry forward is relevant.

I’m in the process of selling my BTL so was going to put some of the proceeds into my pension (I’m 60 and looking to retire in 2-3 years)

There are two limits, the relevant one is your taxable income each tax year. If you will have taxable income (from employment) in two further tax years you can get quite a lot into a pension. Once you retire you can still contribute £2880 and will get 20% tax relief.

The other limit, Annual Allowance, has been £40,000 as recently as 2022/23 so if that is reduced at any point you may need to check you stay within that limit too.

The other thing to watch if you are going to have a capital receipt, is tax on savings interest. 5% interest on £20,000 should be covered by your Personal Savings Allowance but you will be taxed at 20% on everything over that. You could start to move any existing savings into ISAs by the end of this tax year, and premium bonds can be useful to hold cash until you can get anorher chunk into a new tax year’s ISA. But you need to check if the ISA rates make them worthwhile.

I’m already going to exceed my PSA this tax year. ISA has already been maxed out

Sarahspangles

GlasgowExpat2 said:

Sarahspangles said:

The other thing to watch if you are going to have a capital receipt, is tax on savings interest. 5% interest on £20,000 should be covered by your Personal Savings Allowance but you will be taxed at 20% on everything over that. You could start to move any existing savings into ISAs by the end of this tax year, and premium bonds can be useful to hold cash until you can get another chunk into a new tax year’s ISA. But you need to check if the ISA rates make them worthwhile.

I’m already going to exceed my PSA this tax year. ISA has already been maxed out

We’ve been caught by this because of pension lump sums and inheritance. Premium bonds seemed a good idea but OH’s rolling return on full holding is currently 1%! 

Dazed_and_C0nfused

Sarahspangles said:

GlasgowExpat2 said:

Sarahspangles said:

The other thing to watch if you are going to have a capital receipt, is tax on savings interest. 5% interest on £20,000 should be covered by your Personal Savings Allowance but you will be taxed at 20% on everything over that. You could start to move any existing savings into ISAs by the end of this tax year, and premium bonds can be useful to hold cash until you can get another chunk into a new tax year’s ISA. But you need to check if the ISA rates make them worthwhile.

I’m already going to exceed my PSA this tax year. ISA has already been maxed out

We’ve been caught by this because of pension lump sums and inheritance. Premium bonds seemed a good idea but OH’s rolling return on full holding is currently 1%! 

But this time next week he could be a millionaire 😉

Grumpy_chap

dunstonh said:

Thanks. Frustrating that the scheme only applies to higher rate tax payers. 

It doesn't. Some non rate taxpayers and basic rate taxpayers can also use carry forward.   Its not exclusive to higher rate.

Indeed, thanks to the ability to use carry forward, my income tax last year was nil.
This year it will be nil and I can transfer my marriage allowance to my wife, so that will help too.
Them are the rules.

Sarahspangles said:

We’ve been caught by this because of pension lump sums and inheritance. Premium bonds seemed a good idea but OH’s rolling return on full holding is currently 1%! 

I have a few PBs that were gifted from my grandparents when I was born / Christening.
They never return anything.
In the past three months, two lots of £50 so an outstanding rate of return.

You and I could both be millionaires by the end of the year.  That will force my early retirement.

Albermarle

Dazed_and_C0nfused said:

Sarahspangles said:

GlasgowExpat2 said:

Sarahspangles said:

The other thing to watch if you are going to have a capital receipt, is tax on savings interest. 5% interest on £20,000 should be covered by your Personal Savings Allowance but you will be taxed at 20% on everything over that. You could start to move any existing savings into ISAs by the end of this tax year, and premium bonds can be useful to hold cash until you can get another chunk into a new tax year’s ISA. But you need to check if the ISA rates make them worthwhile.

I’m already going to exceed my PSA this tax year. ISA has already been maxed out

We’ve been caught by this because of pension lump sums and inheritance. Premium bonds seemed a good idea but OH’s rolling return on full holding is currently 1%! 

But this time next week he could be a millionaire 😉

Even if you have the full £50K, you would only win a Million once every 43,000 years, so the chance of it happening next week/tomorrow is rather slim.......