TAX YEAR END 2019/20

Industry news, research and expert opinion

Carry Forward ANNUAL ALLOWANCE EXPLAINED

For those clients who can pay contributions above their annual allowance (including those paid by their employer), carry forward is an integral part of tax year end planning. The rules are:

  • any unused annual allowance (standard or tapered) from each of the last 3 tax years is carried forward and added to this year’s allowance,
  • carry forward from a particular tax year is only available if the client was a member of a registered pension scheme in that year,
  • the current year’s allowance is used first, then the allowance of the earliest available carry forward years, then the next earliest year and so on,
  • no formal application is required, but if the annual allowance plus carry forward is exceeded, the excess needs to be noted on the supplementary self-assessment form.
  • earnings are not carried forward, so a scheme member still needs relevant UK earnings to justify personal contributions. Employer contributions, however, are not limited by earnings.

Please be aware that your clients have until tax year end on 5th April to use their 2016/2017 allowances.

CARRY FORWARD EXAMPLE*

Tax year Annual allowance Regular contributions (gross) Unused annual allowance Gross additional contribution Remaining annual allowance
2019-20 £40,000 £22,500 £17,500 £17,500 £0
2018-19 £40,000 £22,500 £17,500 £0 £17,500
2017-18 £40,000 £22,500 £17,500 £15,000 £2,500
2016-17 £40,000 £22,500 £17,500 £17,500 £0
Total of additional contribution       £50,000 £20,000

* Source – The Pensions Advisory Service Website 2019

 

Our useful carry forward calculator can assist in calculating your client’s unused annual allowance.

 

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This information is for UK Financial Adviser use only and should not be distributed to or relied upon by any other person.

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