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Using brought forward annual allowance

Pension contributions

I have an additional rate taxpayer with tapered annual allowance and want to confirm no tax charge arises on excess contributions. I believe the unused allowances are FIFO.

2013-14 Pension cont £20k (max £40k, unused £20k)

2014-15 Pension cont £20k (max £40k, unused £20k)

2015-16 Pension cont £20k (max £40k, unused £20k)

2016-17 Pension cont £20k (max £10k, use £10k 13-14 unused)

2017-18 Pension cont £20k (max £10k, use £10k 14-15 unused)

2018-19 Pension cont £20k (max £10k, use £10k 15-16 unused)

If someone could check that would be great. I have managed to panic my client so good news would be welcome (it took 3 months to get these figures which did not help). Thanks.

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06th Mar 2019 07:41

Yes, FIFO.

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By Branski
06th Mar 2019 09:49

Use HMRC's online checker tool, if you haven't already of course

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to northernmonkey
06th Mar 2019 10:06

Not convinced that would help with the figures quoted by the OP?
Haven't run the figures through it but from memory it doesn't actually identify which years are used / carried forward, just gives the total.
OP you could use the tool but slightly tweak some of your figures if you want to use it to double check.

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By MJShone
06th Mar 2019 11:00

You use the allowance for the year you're looking at first before you use any brought forward. You then use brought forward on a FIFO basis. Your figures look right to me.

However, that's subject to checking that the 2015/16 "split year" unused allowance figure is right. To do that, you need to know how much of the £20k was paid in the period 6 April to 8 July and how much was paid in the period 9 July to 5 April.

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By Matrix
to MJShone
06th Mar 2019 12:26

Sorry I don't know what you mean, I thought I was there.

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to Matrix
06th Mar 2019 12:48

Google 'pre-alignment year'.

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By Matrix
to Wanderer
06th Mar 2019 16:18

But doesn't that just mean that the annual allowance would be at least £40k and I only need £40k?

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06th Mar 2019 13:09

Looks OK as they are level contributions and presuming that there are no issues with where contributions 'sit' by PIP year up to and including 15-16.

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06th Mar 2019 13:20

@Matrix

I've sent you a PM.

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By Matrix
07th Mar 2019 07:23

Thanks all and thanks SteLacca for the offer. I did a spreadsheet (it was in fact more complicated than above but using same rules, so FIFO).

The taper is really hard to work out but the taxpayer earns so much that I just used the minimum of £10k and luckily no tax to pay.

I think the annual allowance was £80k then a split year in 15-16 but I have not amended my above post as £40k was sufficient.

2019-20 could see some tax becoming due for similar taxpayers who have no brought forward allowances, do not have an accountant and have not had any communication from their employer or pension provider about the taper. It will be another HICBC.

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to Matrix
07th Mar 2019 07:58

Matrix wrote:

I think the annual allowance was £80k then a split year in 15-16

Of course it's actually ridiculously more complicated than that:-
£255k 2010/2011 & prior but reduce to £50,000 for c/f purpose.
£50k 2011/2012, 2012/2013 & 2013/2014
£40k 2014/2015
£80k 2015/2016 pre-alignment but c/f max £40k to
£0 2015/2016 post-alignment
£40k subject to taper 2016/2017 on

Then subject to the money purchase annual allowance.

Agree it's going to be the another HICBC. Exacerbates for those in final salary schemes. Think it will also catch up some taxpayers WITH advisers.

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