Exceeded Annual Allowance

davycrep

Hi Looking to have taxes sorted and filed due to exceeding pension annual allowance £300-£400. An error due to an old statement from pension provider. So my calc was slightly off  

Preference to minimise income to £100K. Maybe some gift aid carry back. 

Has anyone had any experiences in this area?  Am I best to go to a tax advisor or financial advisor?

Dazed_and_C0nfused

davycrep said:

Hi Looking to have taxes sorted and filed due to exceeding pension annual allowance £300-£400. An error due to an old statement from pension provider. So my calc was slightly off  

Preference to minimise income to £100K. Maybe some gift aid carry back. 

Has anyone had any experiences in this area?  Am I best to go to a tax advisor or financial advisor?

One thing to note is you can only claim a carry back of Gift Aid on the original return, not an an amended one.

SmileyGiley

Did you use your full 60K/ 100% salary allowance for the past 3 years. If not, you can use the carry forward rule. If you google gov.uk and the following words you should find the govt website information. Google: gov.uk check-if-you-have-unused-annual-allowances-on-your-pension-saving

hugheskevi

davycrep said:

Hi Looking to have taxes sorted and filed due to exceeding pension annual allowance £300-£400. An error due to an old statement from pension provider. So my calc was slightly off  

Preference to minimise income to £100K. Maybe some gift aid carry back. 

Has anyone had any experiences in this area?  Am I best to go to a tax advisor or financial advisor?

Exceeding the Annual Allowance by a trivial amount is not a big issue and no need for a tax or financial advisor to be involved. 

The main thing to do immediately is to register for Self Assessment if you do not already complete it. You will need to know the exact amount by which you exceeded the Annual Allowance, and you just fill those details into the ‘Additional Information’ section. The three boxes usually completed to declare an Annual Allowance pension tax charge are 10, 11 and 12. 

You could possibly use Scheme Pays to meet the charge (pay the charge by using pension scheme assets) but for such a small charge that is probably more trouble than it is worth, and easiest just to pay as part of Self Assessment bill.

Marcon

SmileyGiley said:

Did you use your full 60K/ 100% salary allowance for the past 3 years. If not, you can use the carry forward rule. If you google gov.uk and the following words you should find the govt website information. Google: gov.uk check-if-you-have-unused-annual-allowances-on-your-pension-saving

Carry forward can only be used if someone has sufficient earnings in the tax year in which they make the contribution utilising carry forward (assuming it is a personal contribution*). It's a point which causes endless confusion.

*If contributions are made by the employer (whether 'true' employer contributions or those made by the employer under a salary sacrifice scheme), it may be possible to use carry forward with a lower salary.

hugheskevi

Marcon said:

SmileyGiley said:

Did you use your full 60K/ 100% salary allowance for the past 3 years. If not, you can use the carry forward rule. If you google gov.uk and the following words you should find the govt website information. Google: gov.uk check-if-you-have-unused-annual-allowances-on-your-pension-saving

Carry forward can only be used if someone has sufficient earnings in the tax year in which they make the contribution utilising carry forward (assuming it is a personal contribution*). It's a point which causes endless confusion.

*If contributions are made by the employer (whether 'true' employer contributions or those made by the employer under a salary sacrifice scheme), it may be possible to use carry forward with a lower salary.

I think that description needs a caveat about Defined Benefit schemes too - it would be common for someone to have a salary under £60,000, combined employee and employer pension contribution under £60,000, but for their Pension Input to exceed £60,000 (typically a final salary scheme, long service, and a promotion). 

In that fairly common scenario, the individual can still use carry-forward despite having a 'low' income, and the employee/employer contributions not exceeding £60,000. Admittedly, in this scenario, you can reasonably view the pension input as the employer contribution, but most schemes delight in putting the employer contribution rate and how much the employer has put into the individual's DB pension on payslips and employee remuneration statements, despite it being meaningless at individual-level and hence furthering the confusion for their employees.

davycrep

Hi everyone. Thanks for the prompt responses. Appreciate it. 

I’ve used up all my carry forward years. 

Trying to keep salary at £100k - childcare limitations. 

Pension is defined benefit. 

@hugheskevi. Avoiding scheme pays as it’s just £370.

@Dazed_and_C0nfused, spot on. The very reason I haven’t submitted up until now. 

I’m veering away from the financial adviser route. Keep going on about 1-3% costs and to be honest the providers are doing well enough  

Marcon

hugheskevi said:

Marcon said:

SmileyGiley said:

Did you use your full 60K/ 100% salary allowance for the past 3 years. If not, you can use the carry forward rule. If you google gov.uk and the following words you should find the govt website information. Google: gov.uk check-if-you-have-unused-annual-allowances-on-your-pension-saving

Carry forward can only be used if someone has sufficient earnings in the tax year in which they make the contribution utilising carry forward (assuming it is a personal contribution*). It's a point which causes endless confusion.

*If contributions are made by the employer (whether 'true' employer contributions or those made by the employer under a salary sacrifice scheme), it may be possible to use carry forward with a lower salary.

I think that description needs a caveat about Defined Benefit schemes too - it would be common for someone to have a salary under £60,000, combined employee and employer pension contribution under £60,000, but for their Pension Input to exceed £60,000 (typically a final salary scheme, long service, and a promotion). 

Thank you - I should have included reference to that. Other DB scenario which can deliver a nasty shock in Annual Allowance terms is, of course, enhanced ill health early retirement.

There are a few other hidden gems(!) which might bear mentioning - a handy list of some of them is included on the Civil Service factsheet: https://www.civilservicepensionscheme.org.uk/media/bg2i4iy5/impact-of-annual-allowance-on-ill-health-retirement-jul-2024.pdf

Lorian

Scheme pays option is only a right if the amount owed us over £2k but your pension provider may offer it for a lower amount.