Carry forward
The three year Carry forward rule allows clients or their employer to contribute in excess of the Annual Allowance (AA) of £60,000 since the commencement of the 2023/24 tax year.
What is carry forward?
Carry forward is a method whereby an individual can increase their pension contributions in line with the individual's AA by using the unused portion of their AA from the previous three complete tax years. It was first introduced for tax years 2011/12 onwards, which coincided with the first reduction in the AA.
When is carry forward used?
Once a member has used up their AA for the current tax year, they can carry forward any unused AA from the three immediately previous tax years to the current tax year, starting with the earliest year first. However, carry forward is only available provided the individual was a member (active, deferred, pensioner or pension credit member) of an HMRC registered pension scheme in the relevant tax year being carried-forward from.
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 the lower of the AA and 100% of the member's relevant UK earnings for that tax year.
The AA 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. As noted above, the AA increased to £60,000 from 6 April 2023. In the tax year 2026/27 the carry forward limits which will apply are:
| Tax Year | Annual allowance |
|---|---|
| 2023/24 | £60,000 pa |
| 2024/25 | £60,000 pa |
| 2025/26 | £60,000 pa |
| 2026/27 | £60,000 pa |
What happens if the Tapered Annual Allowance applies?
The Tapered Annual Allowance (TAA) was introduced in the 2016/17 tax year, so the member's threshold and adjusted incomes for that tax year will also be needed to determine the amount of unused AA available to carry forward from each relevant tax year.
This reduces a pension scheme member's AA on a sliding scale for a tax year in which their 'adjusted income' exceeds £260,000 in that tax year. Members with an adjusted income of £360,000 or more in the tax year 2026/27 will have a TAA of £10,000 gross, as has been the case since the tax year 2023/24. This TAA will not apply if a member's 'threshold income' is £200,000 or less - even if they had adjusted income of £260,000 or more.
Please note: If you are subject to the Money Purchase AA (MPAA) 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.