carry forward and salary sacrifice. Am I painted into a corner?

mrklaw

I’m a little confused by carry forward. Not looked at it before but there is potential it may be an option in the next 12 months so just looking at what it entails.

currently I salary sacrifice heavily - down to 50270. This is only recent but I have ramped up over the last two years. So looking back to 23/24 and a chunk of 24/25 there is a lot of unused allowance.

From my googling I’m a little worried that this might scupper me somewhat. if HMRC considers 50270 my ‘actual’ gross earnings then this will actually cap my contributions to 50270 (after grossing up)? does this mean the 45k I’m already on track to contribute this year eats all but 5k of it, or would I be able to separately contribute 40k into a SIPP and have it topped up to 50k?

Marcon

if HMRC considers 50270 my ‘actual’ gross earnings then this will actually cap my contributions to 50270 (after grossing up)?

HMRC doesn't 'consider' those as your gross earnings - they ARE your gross earnings, assuming you have no taxable BIK you haven't mentioned.

Are you taking into account any 'true' (ie non-salary sacrifice) employer contributions, which count for Annual Allowance purposes?

mrklaw

rounding

earning 85k, lets say my ocntributions are 40k, employer 5k. I’m down at 45k.

my gross salary is therefore 45k, contributions have been 45k in total as its all salary sacrifice.

assuming 150k of carry forwards available, whats the maximum I can contribute into a SIPP?

• 0 as contributions are already 45k which matches my gross income?
• 45k taking total contributions to 90k utilising carry forwards
• 40k taking total contributiosn to 85 my original gross salary
• other

Sam_666

Never-mind carry forward, you can only contribute up to your annual gross income, included your and employer contributions. This should be your starting point for any calculations.

As min wage is approx. £23k, your gross income would need to be above £74k for you & employer to contribute £50k. What is your annual gross employment income?

QrizB

I think you're overthinking this.

if HMRC considers 50270 my ‘actual’ gross earnings then this will actually cap my contributions to 50270 (after grossing up)? does this mean the 45k I’m already on track to contribute this year eats all but 5k of it, or would I be able to separately contribute 40k into a SIPP and have it topped up to 50k?

You annual allowance for 2026/27 is £60k. It was also £60k for 25/26, 24/25 and 23/24.

You limit for tax relief is your "relevant earnings". Not all pension contributions qualify for tax relief (eg. employer contributions don't) and so don't count towards the "relevant earnings" limit.

does this mean the 45k I’m already on track to contribute this year eats all but 5k of it

How much of that £45k is a personal contribution that qualifies for RAS tax relief, and how much is an employer contribution (incuding salsac) that is paid gross and doesn't receive RAS tax relief?

QrizB

Also, please ignore Sam_666 above; he's entirely wrong.

mrklaw

my starting salary is 80k. My personal contributions (performed as employer contributions) thorugh salsac is 45k. My employers additional contributions are 5k. (numbers rounded up but about right)

QrizB

My personal contributions (performed as employer contributions) thorugh salsac is 45k. My employers additional contributions are 5k.

OK, so all £50k (45+5) is an employer contribution and none of it counts towards your "relevant earnings" tax relief limit.

It does count towards your £60k Annual Allowance but you say you've got £150k of carry forward available.

my gross salary is therefore 45k

In which case you can personally contribute £36k to a RAS pension scheme and receive £9k of tax relief, for a total gross personal contribution of £45k and a grand total for the year of £90k.

mrklaw

beaut - thank you for laying it it clearly

UKTaxHelper

You can contribute it, but at 45k taxable you're a basic rate payer now. So the SIPP money only gets the 20% at source, no 40% to claim back.

mrklaw

https://forums.moneysavingexpert.com/discussion/comment/82110610#Comment_82110610

yep clear. I’m currently stuffing some into my wife’s SIPP but she’ll hit her maximum. so its more for if we get a lump sum (too soon) whats better than ISA/GIA. diminishing returns but still returns