Carry Forward contribution on SIPP

jim8888

Hi, I didn't use the £3600 allowance that I can contribute to my SIPP last year. Can I carry that forward and contribute £7200 this year? Is there anyone I need to inform, such as HMRC, if I do this? Thanks.

Dazed_and_C0nfused

jim8888 said:

Hi, I didn't use the £3600 allowance that I can contribute to my SIPP last year. Can I carry that forward and contribute £7200 this year? Is there anyone I need to inform, such as HMRC, if I do this? Thanks.

No, it's use it or lose it in your situation.

DavidT67

No, Carry forward is only applicable for those with earned income in current year above £60,000, otherwise it doesn't come into play.

zagfles

DavidT67 said:

No, Carry forward is only applicable for those with earned income in current year above £60,000, otherwise it doesn't come into play.

I see this is still causing utter confusion here and incorrect answers like this just add to it. It's as if carry forwards is a privilege only extended to high earners, when it's the opposite.

For a start, there are two constraints on pension contributions. Firstly, the tax relief limit, which is 100% of relevant earnings, or £3600 if more. This apples to everyone, and there is no carry forwards for ANYONE on this limit. It doesn't matter how much you earn. If you earn 0, or less than £3600, you can contribute £3600 gross (£2880 net). If you earn £20,000, you can contribute £20,000 gross. If you earn £80,000, you can contribute £80,000 gross. If you earn £150,000 you can contribute £150,000 gross. NOBODY can carry forwards the tax relief limit. 

For high earners, or people with gold plated DB schemes, there is an additional constraint on contributions, the annual allowance. This is a totally separate concept to the tax relief limit and has different rules, it works on different figures (eg employer contributions count). This restricts contributions to a "pension input amount" of £60k a year, lower for very high earners. But carry forwards is available, for everyone (with the odd unusual exception). Not just people earning over £60k, everyone. However, due to the tax relief limit, it's simply not relevant for low earners, it's not something they need worry about. Just like a 60mph speed limit still applies to mopeds, but is just not relevant for them as their vehicle can't get to that speed. It's a constraint that in practice only applies to vehicles that are capable of getting to that speed. 

However plenty of people earning well under £60k may find they exceed the annual allowance even if they stay within the tax relief limit, for instance if they have a gold plated DB scheme. So not only is it wrong to state that carry forwards is only available to high earners, it's also wrong to state that only people earning over £60k can make practical use of carry forwards. 

Bottom line is that carry forwards applies to the annual allowance, not the tax relief limit. Low earners don't need to worry about the annual allowance, just the tax relief limit. The annual allowance is an additional constraint on high earners, on top of the tax relief limit. Low earners don't need to worry about this additional constraint. But they also need to understand that talk of carry forwards is not relevant to them because it applies to a limit that doesn't affect them. 

FIREDreamer

zagfles said:

DavidT67 said:

No, Carry forward is only applicable for those with earned income in current year above £60,000, otherwise it doesn't come into play.

I see this is still causing utter confusion here and incorrect answers like this just add to it. It's as if carry forwards is a privilege only extended to high earners, when it's the opposite.

For a start, there are two constraints on pension contributions. Firstly, the tax relief limit, which is 100% of relevant earnings, or £3600 if more. This apples to everyone, and there is no carry forwards for ANYONE on this limit. It doesn't matter how much you earn. If you earn 0, or less than £3600, you can contribute £3600 gross (£2880 net). If you earn £20,000, you can contribute £20,000 gross. If you earn £80,000, you can contribute £80,000 gross. If you earn £150,000 you can contribute £150,000 gross. NOBODY can carry forwards the tax relief limit. 

For high earners, or people with gold plated DB schemes, there is an additional constraint on contributions, the annual allowance. This is a totally separate concept to the tax relief limit and has different rules, it works on different figures (eg employer contributions count). This restricts contributions to a "pension input amount" of £60k a year, lower for very high earners. But carry forwards is available, for everyone (with the odd unusual exception). Not just people earning over £60k, everyone. However, due to the tax relief limit, it's simply not relevant for low earners, it's not something they need worry about. Just like a 60mph speed limit still applies to mopeds, but is just not relevant for them as their vehicle can't get to that speed. It's a constraint that in practice only applies to vehicles that are capable of getting to that speed. 

However plenty of people earning well under £60k may find they exceed the annual allowance even if they stay within the tax relief limit, for instance if they have a gold plated DB scheme. So not only is it wrong to state that carry forwards is only available to high earners, it's also wrong to state that only people earning over £60k can make practical use of carry forwards. 

Bottom line is that carry forwards applies to the annual allowance, not the tax relief limit. Low earners don't need to worry about the annual allowance, just the tax relief limit. The annual allowance is an additional constraint on high earners, on top of the tax relief limit. Low earners don't need to worry about this additional constraint. But they also need to understand that talk of carry forwards is not relevant to them because it applies to a limit that doesn't affect them. 

This needs to be a ‘sticky”.

DavidT67

zagfles said:

DavidT67 said:

No, Carry forward is only applicable for those with earned income in current year above £60,000, otherwise it doesn't come into play.

I see this is still causing utter confusion here and incorrect answers like this just add to it. It's as if carry forwards is a privilege only extended to high earners, when it's the opposite.

...

Bottom line is that carry forwards applies to the annual allowance, not the tax relief limit. Low earners don't need to worry about the annual allowance, just the tax relief limit. The annual allowance is an additional constraint on high earners, on top of the tax relief limit. Low earners don't need to worry about this additional constraint. But they also need to understand that talk of carry forwards is not relevant to them because it applies to a limit that doesn't affect them. 

So the last paragraph of your overly long explanation agrees with my brief and simple statement...  Somewhat harsh to call it an 'incorrect answer' then.

nomorekids

May I jump on board and ask a simple, I hope its a simple question. 

Not paid into my SIPP for a number of years and earn from employment around £15000, another £20000 gross from rental and pay about £1000 a year into work place pensions. Always pay basic rate tax and for last couple of years had to pay tax on savings less £1000 as I've blown the limit slightly.

This year then its my understanding I can pay £42000 into my SIPP? 

Marcon

nomorekids said:

May I jump on board and ask a simple, I hope its a simple question. 

Not paid into my SIPP for a number of years and earn from employment around £15000, another £20000 gross from rental and pay about £1000 a year into work place pensions. Always pay basic rate tax and for last couple of years had to pay tax on savings less £1000 as I've blown the limit slightly.

This year then its my understanding I can pay £42000 into my SIPP? 

Where does that understanding come from...?

You can only make personal contributions in respect of 'relevant earnings'. Full list here of what constitutes relevant earnings: https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm044100

zagfles

nomorekids said:

May I jump on board and ask a simple, I hope its a simple question. 

Not paid into my SIPP for a number of years and earn from employment around £15000, another £20000 gross from rental and pay about £1000 a year into work place pensions. Always pay basic rate tax and for last couple of years had to pay tax on savings less £1000 as I've blown the limit slightly.

This year then its my understanding I can pay £42000 into my SIPP? 

OMG. Why do I bother. Read the second paragraph of my first post. I really don't know how to make it any clearer. Perhaps someone else can. 

Marcon

zagfles said:

nomorekids said:

May I jump on board and ask a simple, I hope its a simple question. 

Not paid into my SIPP for a number of years and earn from employment around £15000, another £20000 gross from rental and pay about £1000 a year into work place pensions. Always pay basic rate tax and for last couple of years had to pay tax on savings less £1000 as I've blown the limit slightly.

This year then its my understanding I can pay £42000 into my SIPP? 

OMG. Why do I bother. Read the second paragraph of my first post. I really don't know how to make it any clearer. Perhaps someone else can. 

I think it's your second paragraph that's caused confusion, especially if that's the only bit OP read:

For a start, there are two constraints on pension contributions. Firstly, the tax relief limit, which is 100% of relevant earnings, or £3600 if more. This apples to everyone, and there is no carry forwards for ANYONE on this limit. It doesn't matter how much you earn. If you earn 0, or less than £3600, you can contribute £3600 gross (£2880 net). If you earn £20,000, you can contribute £20,000 gross. If you earn £80,000, you can contribute £80,000 gross. If you earn £150,000 you can contribute £150,000 gross. NOBODY can carry forwards the tax relief limit.

zagfles

Marcon said:

zagfles said:

nomorekids said:

May I jump on board and ask a simple, I hope its a simple question. 

Not paid into my SIPP for a number of years and earn from employment around £15000, another £20000 gross from rental and pay about £1000 a year into work place pensions. Always pay basic rate tax and for last couple of years had to pay tax on savings less £1000 as I've blown the limit slightly.

This year then its my understanding I can pay £42000 into my SIPP? 

OMG. Why do I bother. Read the second paragraph of my first post. I really don't know how to make it any clearer. Perhaps someone else can. 

I think it's your second paragraph that's caused confusion, especially if that's the only bit OP read:

For a start, there are two constraints on pension contributions. Firstly, the tax relief limit, which is 100% of relevant earnings, or £3600 if more. This apples to everyone, and there is no carry forwards for ANYONE on this limit. It doesn't matter how much you earn. If you earn 0, or less than £3600, you can contribute £3600 gross (£2880 net). If you earn £20,000, you can contribute £20,000 gross. If you earn £80,000, you can contribute £80,000 gross. If you earn £150,000 you can contribute £150,000 gross. NOBODY can carry forwards the tax relief limit.

Feel free to rephrase. People obviously aren't understanding. I thought I was clear that if you earn eg £20k you can't contribute more than £20k and there is no carry forwards.