Keep Calm And Carry Forward

Keep Calm And Carry Forward

The pension Annual Allowance (AA) is the maximum allowable contribution per annum, currently £40,000 for tax year 2016 / 2017. However, did you know that ‘carry forward’ relief is available from tax year 2013 / 2014 for clients wishing to consider contributions in excess of the AA?

The amount of carry forward relief is the standard allowance for each tax year (£40,000 in tax years 2014 / 2015 and 2015 / 2016, and £50,000 in 2013 / 2014) less contributions made and/or final salary pension accrual in those tax years.

So, for most investors there will be plenty of relief available to continue or even increase contributions to make the most of this tax planning feature.

For example, Mike earns over £100,000 per annum and invests via his Company £25,000 each year into his pension. After speaking with his accountant he now wants to contribute an additional sum for end of financial year corporate tax planning reasons and wants to know how much he could invest. I advise him as follows:-

Tax Year

Contributions Annual Allowance

Unused Annual Allowance

2013 / 2014

£25,000 £50,000 £25,000

2014 / 2015

£25,000 £40,000

£15,000

2015 / 2016

£25,000 £40,000

£15,000

2016 / 2017

£25,000 £40,000

£15,000

Total    

£70,000

Therefore, in addition to the regular contributions of £25,000 he has additional relief of £70,000 that could be mopped up during the tax year 2016 / 2017. If the relief for 2013 / 2014 is not utilised by 5th April 2017 this will fall away and be lost.

For an assessment of your own situation in respect of carry forward relief please call me in the first instance for an initial discussion.