Pension Allowance Carryover

Mx7x

Hi,

TL;DR question: When carrying over 60k, so I have to use ALL of the current years 60k allowance before borrowing from previous years, or can I use 30k from this year, 20k from last year etc?

Full info:

I recently learned about the 60% UK tax trap, which I have been caught in for the past 3 years. I've previously been maxing ISA for the past few years and holding remainder in standard accounts (bad I know now), but understand I would be far more tax efficient dropping into a SIPP. I am 46.

I understand the carryover is 60k and can be used for the past 3 years. Up until now I have had only a workplace pension. These are very rough numbers:
2024: £140k comp, £15k pension
2023: £130k comp, £13k pension
2022: £150k comp (good bonus year), £12k pension

Hindsight is easy, I should have put 48k in 2022 (60k-12k), 47k in 2023 and 35k this year into a SIPP, I think. Can I use the previous years allowances like this to backflush each years' salary to under 100k, or would I have to put 120k into a SIPP before I can get to the 2022 allowance, this rendering it 168k (120+48k) needed to get the tax back, rather than 130k (48+47+35)?

Thanks

TheSpectator

You need to use the current years £60k first.

HappyHarry

You cannot get tax back from previous years. If you make a contribution this year (2024/2025) using carry forward from 2022 then it affects your tax for 2024/2025 but has no impact on the tax you paid in 2022.  You are just carrying forward the unused pension allowance to this tax year, not backdating the contribution.

HappyHarry

Just to add, the annual allowance has not always been £60,000.

2024/2025 - £60,000
2023/2024 - £60,000
2022/2023 - £40,000
2021/2022 - £40,000

So in practice you could add a maximum contribution of £200,000 this tax year if you had all your carry forward available.

Marcon

HappyHarry said:

Just to add, the annual allowance has not always been £60,000.

2024/2025 - £60,000
2023/2024 - £60,000
2022/2023 - £40,000
2021/2022 - £40,000

So in practice you could add a maximum contribution of £200,000 this tax year if you had all your carry forward available.

...and you have 'relevant earnings' in this tax year of at least the amount you want to contribute this tax year.

HappyHarry

Marcon said:

HappyHarry said:

Just to add, the annual allowance has not always been £60,000.

2024/2025 - £60,000
2023/2024 - £60,000
2022/2023 - £40,000
2021/2022 - £40,000

So in practice you could add a maximum contribution of £200,000 this tax year if you had all your carry forward available.

...and you have 'relevant earnings' in this tax year of at least the amount you want to contribute this tax year.

... or are making employer contributions.

DRS1

For the 60K figures you also need to include the employer contributions or if the workplace pension is a DB arrangement then the "Pension Input Amount".  Just to keep it simple!
That is not the same as when you work out how much you can contribute in a year and get tax relief where it is just your employee contributions which count.
So in principle you could contribute 100% of your earnings - so £140K this tax year (including the £15K you have already contributed).  But that is over the annual allowance so:
Let's imagine you are in a DC pension scheme and your employer pays the same contributions as you do so for 2024 you will have used up £30K of the £60K allowance.  That means £30K of the £140K is covered by this years allowance and you have to go back to 21/2 to see how much of that allowance is available (£40K - £24K = £16K) and then on to 22/3 for the same sum (£40K - £26 = £14K) At which point I run out of figures but you get the point.