Pension allowance and 3 year carry forward.

scaashiana

Hi

I'm trying to work out what my pension allowance will be for 2025-26 (i.e. next tax year), so I can plan ahead.

I've used the government website to work out what it is for the current 2024-25 tax year (figures below).

I think I'm getting into a muddle when I carry forward unused allowances from previous years.

Here are my figures for the relevant three year allowance calculations:

2022-23
£40k Pension allowance
£20k Pension contributions

2023-24
£60k Pension allowance
£49k Pension contributions

2024-25
£60k Pension allowance
£91k Pension contributions

FYI : The govt website said that, for the current 2024-25 tax year, my allowance is £122k, using the 3 year carry forward.

I think that my allowance for 2025-26 will be £90k (i.e. including the £60k allowance for the new tax year).  Have I worked that out correctly?

I'm reluctant to use up more of my current allowance this year, so that I can carry that forward and stay below the 40% threshold for next year.

I think I'm a fairly standard case. I can confirm that I have not accessed benefits and that my threshold and adjusted income is below £200k.

Thanks

hugheskevi

You need your 2021/22 Pension Inputs, to determine how much was available from that year to carry forward for the breach in 2024/25.

From the figures you reference, your pension contributions appear to have been £9K in 2021/22 - is that correct?

If it is, then you should have £91K for 2025/26 including carry forward.

scaashiana

Thank you @hugheskevi,

Yes, that's correct, my pension contributions in 2021-22 were a (measly) £9k .

Many thanks

MetaPhysical

I think you know anyway but for the record, be advised that if you want to "fill" previous years, you must fill this tax year first and then any "overspill" will go to the oldest year first.  You cannot selectively "fill" a year of your choosing.  Also, to fill previous years you must fill "this" year first.  With a £60k annual allowance not many can do that.  You also cannot contribute more than your current earnings either, which brings me onto a related question I wanted to ask on your thread if I may OP??

Say my salary is 30k.  Can I "fill" that 30k and THEN overspill to earlier years so as to keep in line with the fact that you can't contribute more than your current earnings in the current tax year?  What happens for people on less than 60k?  Is the ability to access previous years not open to them?

hugheskevi

MetaPhysical said:

Say my salary is 30k.  Can I "fill" that 30k and THEN overspill to earlier years so as to keep in line with the fact that you can't contribute more than your current earnings in the current tax year? 

The maximum amount you can receive tax relief on is £30,000. Your Annual Allowance is £60,000.

If you contributed, say, £50,000 then you would get tax relief up to £30,000 and no tax relief on the remaining £20,000. There could be administrative issues with this, and it is unlikely to be a financially sensible decision. You would still be within the Annual Allowance.

If you went further and contributed, say, £70,000. You would get tax relief up to £30,000 and no tax relief on the remaining £40,000. You would have breached the Annual Allowance by £10,000 but could use carry-forward from past 3 years to reduce or remove the tax charge from the breach.

MetaPhysical said:

What happens for people on less than 60k?  Is the ability to access previous years not open to them?

The same rules apply. It is common in final salary schemes for members earning less than £60,000 to have pension inputs exceeding £60,000.

MetaPhysical

Brilliant, thanks for clearing that up for me @hugheskevi

DavidT67

Carry forward only available to those with current year earnings over £60K, or those receiving substantial employer contributions or DB scheme uplift.

i.e. you can earn £50K and have £100K of pension contributions using carry forward, if £50K of more of that is employer contributions.