Carry forward.

Your client, or their employer, can contribute in excess of the Annual Allowance of £50,000 by taking advantage of the ‘three year carry forward rule’ introduced from April 2011.

This means that any unused Annual Allowance from the previous three tax years to the current year can be carried forward. However, the full allowance for the current year must be used first. Unused allowance will be taken from the earliest year in which there is unused annual allowance.

HMRC has clarified that, with effect from 25 November 2011, contributions previously paid in excess of the deemed Annual Allowance of £50,000 will now be ignored for calculating carry forward during the 'three year' transitional phase.

HMRC has also clarified that your client must be either an active member, a pension member, a deferred member or a pension credit member of a pension scheme for the year they wish to 'carry forward' their unused allowance.

Tax relief on contributions is only granted in the year in which carry forward contributions are paid and must be supported by earnings.

In addition, your client must have earned taxable income to justify the full personal contribution in the year in which it is made.

For more information please see our News item.