Client overpaid into her pension pot for 2015-2017

Didn't find your answer?

I know it is a basic question but after 20 years a first for me.  Client paid £33K into her personal pension with tax savings £41500.  Her net profit was £38k.  I want to show as much as possible on the self assessment for 2016-17 and the rest back to 2015-16 where she has capacity.

I tried the agent helpline but after a while they decided I needed the technical people and after a while a message came "all our agents are busy ring again" already one of those days so hope a kind colleage will tell me how to show this on the self assessment......

Thanks in advance

Replies (10)

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By Accountant A
18th Oct 2017 14:08

No such thing as carry back of excess contributions is there?

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By pat76
18th Oct 2017 14:37

Thanks but standard life says excess can be carried back for up to three years?

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Replying to pat76:
By Ruddles
18th Oct 2017 14:46

I bet it doesn’t.

Read it again - carefully this time.

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By pat76
18th Oct 2017 15:10

It says
"Will you have to pay a tax charge?
Not necessarily. Its possible to offset some or all of the overpaid amount against unused allowance from the previous three years. This is known as carry forward."

Have I misunderstood?

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Replying to pat76:
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By Matrix
18th Oct 2017 15:40

You can use unused allowances from prior years to make increased contributions but the tax relief is given in the year the contributions are made.

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Replying to pat76:
By Ruddles
18th Oct 2017 15:56

Well, since you’re now referring to carry forward and your previous comment referred to carry back, I’d say that yes you have misunderstood.

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Scooby
By gainsborough
18th Oct 2017 16:50

Pat, if your client's relevant earnings for 2016/17 were £38,000 (assuming no other trade/employment/FHL income), then the maximum tax relievable pension contribution is £38,000 gross (£30,400 net).

The rules you are referring to are to do with the annual allowance for pensions. The annual allowance was £40,000 for 2016/17 but you are allowed to bring forward any unused capacity from the previous three tax years if you were a member of a pension scheme in the year brought forward. I do suggest that you have a look at these rules on HMRC's website or, as Ruddles suggests, another read through the Standard Life documents.

Carrying back contributions is not a possibility.

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By David Heaton
18th Oct 2017 17:03

Are you clear about the difference between maximum tax-deductible contributions and the cumulative annual allowance?

You say your client had taxable profits of £38k. With your facts, that is the cap on her relievable contributions for the year - FA 2004, s190. The annual allowance charge rules in FA 2004, s227 et seq are separate and are aimed at recovering tax relief on contributions that would otherwise be allowable but are above the fixed common limit for all taxpayers.

If her profits had been (say) £50k, she could have used the current year annual allowance and any unused brought forward figures to cover the £41.5k contribution, but she only has £38k of headroom this year. It seems she has probably had tax relief at source on £3.5k of non-deductible contributions. The pension provider will probably allow a refund known as an 'excess contributions lump sum' because the excess was paid in error above the permitted maximum (she presumably didn't know her profits at the time?). She can then pay the money in for the following year instead.

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By pat76
19th Oct 2017 06:31

Many thanks to all I am now clear and very grateful!

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By Rammstein1
19th Oct 2017 08:58

One option could be to not claim CA's or AIA to bump up her profit and net relevant earnings.

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