Carry forward.

Clients, or their employer, can contribute in excess of the Annual Allowance  of £40,000 (since tax year 2014/15) by taking advantage of the ‘three year carry forward rule’ introduced from April 2011. Please see our case study.

Once a client has used up their annual allowance for the current tax year, they can carry forward any unused annual allowance from the three immediately preceding tax years to the current tax year, starting with the earliest year. However, carry forward is only available provided the client was a member (active, deferred, pensioner or pension credit member) of an HMRC registered pension scheme in the relevant tax year.

Tax relief on personal and employer contributions is only available for the tax year/employer’s accounting year in which the contributions are paid and for personal contributions is limited to 100% of the client’s relevant UK earnings for that tax year.

The annual allowance reduced to £40,000 on 6 April 2014 and the carry forward limit for unused allowances arising in tax years from 2014/15 also reduced to £40,000 pa.

In 2019/20 the carry forward limit that will apply is:
2016/17*       £40,000pa
2017/18        £40,000pa
2018/19        £40,000pa
2019/20        £40,000 pa

*Due to an interim Budget on 8 July 2016, the annual allowance for the tax year was increased to £80,000 but if this had not all been used up before 9 July 2016 only £40,000 of it could be carried forward to the period 9 July to 5 April 2017. It is only any unused part of this £40,000 that can be carried forward.

The Tapered Annual Allowance was introduced in the 2016/17 tax year, so the client's threshold and adjusted incomes for that tax year will also be needed to determine the amount of unused allowance available to carry forward from each relevant tax year.

Please note: If you are subject to the Money Purchase Annual Allowance as a result of drawing retirement income or taking Uncrystallised Funds Pension Lump Sum (UFPLS), there is no carry forward available at all for money purchase pension schemes, even if in the three previous years you were not subject to the MPAA.