Annual Allowance previous years

NickPoole

So I have question if you guys can help.

In 2023/24 I went over my annual allowance by £28K due to a promotion but in 20/1 I had unusead allowance of 26K and in 2021/22 I had unused allowance of 29K so all well and good. In22/23 I had 3K unused allowance

In 2024/2025 I reckon I'll be under but only by about 6K

In 2025/2026 though I plan to pump money into AVC for final year and think I'll exceed by about 18K - the question is will the previous year calculation be based upon revised unused amounts or basically just look at 22/23 4K spare, 23/24 (well over 28K) and 24/25 6K credit)  in which case I am doomed?

These are the figures:

20/21 13,834 (26,166 unused)
21/22 10,066 (29,934 unused)
22/23 36,093 (3,907 unused)
23/24 88,110 (28,110 over)
24/25 53,992 (6,008 unused)
26/27 78,000 (18,000 over)

Am I going to owe tax? Or does the rollover effect save me?

NickPoole

I suppose what I am asking is whether they use a revised 23/24 figure based upon unused allowance from carry back at the time?

Dazed_and_C0nfused

NickPoole said:

I suppose what I am asking is whether they use a revised 23/24 figure based upon unused allowance from carry back at the time?

You cannot use carry back anymore, that was scrapped a very long time ago.

Based on what you have posted you are well over the maximum you could contribute in 2025-26 from an annual allowance perspective.

El_Torro

As I understand it (I could well be wrong) HMRC only looks at the previous 3 tax years. So if you want to make a big contribution in 26 / 27 then it goes back to 25 / 26, 24 / 25 and 23 / 24. Therefore you can contribute just over £6k from 24 / 25 plus whatever you are allowed from 25 / 26 plus £60k in 26 / 27. You can't take anything from 23 / 24 because you already went over your annual allowance that year.

So no, I don't think you can do what you suggest.

QrizB

I agree with the comments above.

In 23/24 you used up your 20/21 carry-forward and a bit of the 21/22 one.

In 24/25 the remaining 21/22 carry-forward went unused.

In 25/26 you've got 22/23 (3907), 23/24 (0) and 24/25 (6008) available, which totals £9915. If you contribute £18k you'll get no tax relief on £8085 (and will then be liable to pay tax when you withdraw it).

hugheskevi

Did you type 26/27 in the table by mistake, as that is not consistent with the text?

Assuming (i) that 26/27 should be labelled 25/26 and (ii) that you are not subject to a tapered Annual Allowance in any past year, then you can use unused Annual Allowance from 2022/23, 2023/24 and 2024/25 to mitigate a breach in 2025/26.

The breach in 2023/24 applied unused Annual Allowance from 2020/21 and 2021/22 to result in no charge being due. Hence the unused amount in 2022/23 remains available to mitigate a breach in 2025/26.

So for 2025/26 you have £3,907 from 2022/23 unused, nothing from 2023/24, and £6,008 from 2024/25. That is a total of £9,915 which when added to the standard allowance for 2025/26 means you can have a pension input of £69,915 before an Annual Allowance tax charge becomes due.

If you were to have a pension input of £78,000 you would breach by £8,085 and owe tax on that at your marginal rate. If your marginal rate was 40%, you would have an Annual Allowance tax charge of £3,234 to pay to HMRC, either direct to HMRC via self-assessment, or using Scheme Pays (still via self-assessment).

Triumph13

To put it more simply, you always use current year allowance first, then oldest available carry forward. So the 23/24 allowance was fully used at the time.

NickPoole

That's very useful guys (and guyesses (?) - key thing for me is 23/24 will be treated as zero in 25/26

And yes HughesKevi, well spotted the typo.

I still wait the actuals for 24/25  (the figures are my calculations) so we will have another look then.

25/26 I plan to put nearly £40K into AVC but also partially retire in Jul so am a bit confused about how working out the pension increases for Classic & Alpha will work for that (this) year. I could always retire!

Qyburn

NickPoole said:

25/26 I plan to put nearly £40K into AVC but also partially retire in Jul so am a bit confused about how working out the pension increases for Classic & Alpha will work for that (this) year. I could always retire!

Will you have earned enough?

NickPoole

Qyburn said:

NickPoole said:

25/26 I plan to put nearly £40K into AVC but also partially retire in Jul so am a bit confused about how working out the pension increases for Classic & Alpha will work for that (this) year. I could always retire!

Will you have earned enough?

Yes, pay for that year will be about £58K