Using up previous years "unused" pension allowance

Marcon

Sarahspangles said:

silvercue said:

Sarahspangles said:

Agree with the above, and just in case…. I couldn’t see the magic word ‘gross’ in your post. If tax relief was given on top of your contribution, and you haven’t included it, that also counts against your Annual Allowance.

I have included tax relief for all of my contributions.  My work contributions were before tax, so I was assuming I did not need to do anything else there

Yes that’s right, if you salary sacrifice or your pension contribution is taken before tax (net pay) then you have received the highest relief available.

I'm not sure it is right. OP hasn't said anything about salary sacrifice - the references have all been to 'I paid...' and they have confirmed they have included tax relief for all their contributions.

'Work contributions' seems to refer to 'employer contributions', although it isn't clear that's what OP means.

OP, please could you clarify? If you don't, there's a danger you'll draw the wrong conclusions from some of the answers on this thread.

dunstonh

Sorry if I have missed it mentioned already but do you earn enough to use carry forward or have access to employer contributions that can utilise it?

silvercue

Marcon said:

Sarahspangles said:

silvercue said:

Sarahspangles said:

Agree with the above, and just in case…. I couldn’t see the magic word ‘gross’ in your post. If tax relief was given on top of your contribution, and you haven’t included it, that also counts against your Annual Allowance.

I have included tax relief for all of my contributions.  My work contributions were before tax, so I was assuming I did not need to do anything else there

Yes that’s right, if you salary sacrifice or your pension contribution is taken before tax (net pay) then you have received the highest relief available.

I'm not sure it is right. OP hasn't said anything about salary sacrifice - the references have all been to 'I paid...' and they have confirmed they have included tax relief for all their contributions.

'Work contributions' seems to refer to 'employer contributions', although it isn't clear that's what OP means.

OP, please could you clarify? If you don't, there's a danger you'll draw the wrong conclusions from some of the answers on this thread.

Hi.  So what I meant is.

The numbers I showed are total contributions to my pension.  That includes salary sacrifice, employer contribution and additional payments I have made that have had tax relief applied.  

My employer contributes a value at 10% of my salary.  I contribute half my salary.  

Dazed_and_C0nfused

silvercue said:

Marcon said:

Sarahspangles said:

silvercue said:

Sarahspangles said:

Agree with the above, and just in case…. I couldn’t see the magic word ‘gross’ in your post. If tax relief was given on top of your contribution, and you haven’t included it, that also counts against your Annual Allowance.

I have included tax relief for all of my contributions.  My work contributions were before tax, so I was assuming I did not need to do anything else there

Yes that’s right, if you salary sacrifice or your pension contribution is taken before tax (net pay) then you have received the highest relief available.

I'm not sure it is right. OP hasn't said anything about salary sacrifice - the references have all been to 'I paid...' and they have confirmed they have included tax relief for all their contributions.

'Work contributions' seems to refer to 'employer contributions', although it isn't clear that's what OP means.

OP, please could you clarify? If you don't, there's a danger you'll draw the wrong conclusions from some of the answers on this thread.

Hi.  So what I meant is.

The numbers I showed are total contributions to my pension.  That includes salary sacrifice, employer contribution and additional payments I have made that have had tax relief applied.  

My employer contributes a value at 10% of my salary.  I contribute half my salary.  

But do you earn enough to be able (within the rules) to make contributions that utilise unused annual allowance?

There seems to be more posts from people who ask about this then realise carry forward isn't an option for them than people who can genuinely use carry forward.

kempiejon

silvercue said:

My employer contributes a value at 10% of my salary.  I contribute half my salary.  

Am I right to understand this to mean you can contribute 40% more, include the relief. Unused carry forward can be added to the £60k current allowance untill your remaining 40% is all in. Too much and there's a tax charge. I used to get about 90% of my salary in not wanting to make an error and trigger the tax charge.

Triumph13

So in summary, last year's £53k represented 60% of your gross salary, 10% from employer and 50% from you.  That means your salary is indeed high enough to allow the proposed £70k of gross contributions.

That £70k will use up the following allowances:
£60k from 25/26
£2k from 22/23
£8k from 23/24

The allowance available in 26/27 will then be the £60k from that year, the remaining £4k from 23/24 and the £7k from 24/25

That all looks fine.  The only thing I would say is that you are contributing quite a bit that will only be getting tax relief at 20%.  Don't leave yourself so short that you end up not being able to contribute the whole of your higher rate income in future years - better to park it in an ISA for now and contribute later if you think that's a risk.

Aretnap

Triumph13 said:

The only thing I would say is that you are contributing quite a bit that will only be getting tax relief at 20%.  Don't leave yourself so short that you end up not being able to contribute the whole of your higher rate income in future years - better to park it in an ISA for now and contribute later if you think that's a risk.

That also begs the question of whether the OP expects to be a higher rate taxpayer in retirement. I don't know if course, but given the amount he is paying into his pension it sounds like it is at least a possibility.

If so there is no point saving the equivalent of 20% tax through tax relief, only to have it taxed at an effective rate of 30-40% (depending on TFLS availability) when he comes to withdraw it.

silvercue

kempiejon said:

silvercue said:

My employer contributes a value at 10% of my salary.  I contribute half my salary.  

Am I right to understand this to mean you can contribute 40% more, include the relief. Unused carry forward can be added to the £60k current allowance untill your remaining 40% is all in. Too much and there's a tax charge. I used to get about 90% of my salary in not wanting to make an error and trigger the tax charge.

My plan only allows a max of 50% salary to be added to pension.

This thread has reminded me that there is also a limit based on salary as well as the £60k p.a.    

So, thanks, I think I have what I need now.

silvercue

Aretnap said:

Triumph13 said:

The only thing I would say is that you are contributing quite a bit that will only be getting tax relief at 20%.  Don't leave yourself so short that you end up not being able to contribute the whole of your higher rate income in future years - better to park it in an ISA for now and contribute later if you think that's a risk.

That also begs the question of whether the OP expects to be a higher rate taxpayer in retirement. I don't know if course, but given the amount he is paying into his pension it sounds like it is at least a possibility.

If so there is no point saving the equivalent of 20% tax through tax relief, only to have it taxed at an effective rate of 30-40% (depending on TFLS availability) when he comes to withdraw it.

No, I don't expect to be.   I am contributing lots to my pension now, but that is after years of neglect, so the pot is actually not big at all.  I am also in my 50s already

QrizB

silvercue said:

kempiejon said:

silvercue said:

My employer contributes a value at 10% of my salary.  I contribute half my salary.  

Am I right to understand this to mean you can contribute 40% more, include the relief. Unused carry forward can be added to the £60k current allowance untill your remaining 40% is all in. Too much and there's a tax charge. I used to get about 90% of my salary in not wanting to make an error and trigger the tax charge.

My plan only allows a max of 50% salary to be added to pension.

That limit is for your employer's scheme?

You could, if you wanted to contribute more than that (eg. to move "other" savings into your pension for the tax benefits), open a personal pension and pay into that.

Of course you still need money to live on, so exceeding 50% of salary might not be affordable.