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How the tapered annual allowance impacts on carry forward

Technical Article

Publication date:

12 February 2019

Last updated:

23 September 2019


Samantha Kaye

The end of the tax year is fast approaching, and advisers are frantically calculating carry forward allowances and how the tapered annual allowance impacts on carry forward.

The calculations are easily muddled so its best to separate the two tasks. Here’s a reminder.

The tapered annual allowance came into force in the 2016/17 tax year so if your client has total earnings/income (approx. £100,000 as a starting point) in that tax year then you will need to obtain information from their accountant. Ask for a P60 or a copy of the tax return. You will also need total earnings and or income information from 2017/18 and 2018/19. Remember its total earnings or income so pension income, dividends, property rental income, P11d benefits etc are all included in the definition.

With the income information, together with details of employee or personal and employer pension contributions made, you can then calculate threshold and adjusted income for each tax year so you can see what the actual allowance is for each of the tax years (2016/17, 2017/18 and a best estimate for 2018/19).

Next, obtain a pension savings statement for each scheme that your client has been contributing to. The pensions savings statement will give you the pensions input amount for each of the last three tax years. You can then compare the pensions input against the unused allowances subject to the tapered cap for each tax year, for this and the last three tax years to see if carry forward can be utilised before the end of the tax year.

The good news is that come 6 April 2019 the pre/post alignment tax year of 2015/16 falls away.

Who said pensions are simple? 

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This document is believed to be accurate but is not intended as a basis of knowledge upon which advice can be given. Neither the author (personal or corporate), the CII group, local institute or Society, or any of the officers or employees of those organisations accept any responsibility for any loss occasioned to any person acting or refraining from action as a result of the data or opinions included in this material. Opinions expressed are those of the author or authors and not necessarily those of the CII group, local institutes, or Societies.