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Pensions allowance and relief - returned from overseas

Posted: Sun Feb 10, 2019 10:31 am
by LeonFer
Hi i am trying to find out whether I can use annual allowance from years that I was living abroad to contribute into my SIPP.
I have been a member of a registered pension scheme (company) since 2001 and was contributing until Sep 2012 when I moved abroad for work. I returned in mid April 2017 to continue to work.
Assuming the total contribution I make is not more than 100% of my 2018 earnings and I used up my current years allowance, can I then make a personal contribution in this tax year to use up allowances carried forward from 15/16 and 16/17 (£40k each since no contribution was made)? And would i be entitled to tax relief on those contributions?

I have had and read very conflicting guidance on this: A) Some guidance has been the fact I was not earning in the UK in those prior years means I can't use the carry forward at all B) the full allowance can be used but given I had no earnings in the prior years I cannot claim more than relief on 3,600 gross so could only contribute 2,880 (despite paying tax this year on the amount i am looking to contribute because is will come from 2018 earnings) C) Some guidance has been I can use the full carry forward and claim the relevant relief up to 100% of my 2018 earning because i was a member of the scheme and made no contributions during those prior years.


Re: Pensions allowance and relief - returned from overseas

Posted: Sun Feb 10, 2019 1:29 pm
by AdamS93
A, B and C are all slightly wrong in my opinion.

In 2018/19 (the current tax year). You can make gross personal contributions up to 100% of your net relevant earnings period. Any contributions on top of this will not attract tax relief. Therefore, unless you have relevant earnings in excess of £40k, the maximum contribution you will receive tax relief for if 100% of your relevant earnings. The way to look at this is that you are only entitled to tax relief up to the amount of income you have paid tax on (broadly speaking).

You can carry forward any unused annual allowance from the previous three years if you were a member of a registered pension scheme in those years. The annual allowance charge is a totally separate test to the above, and is more common when individuals have significant employer pension contributions. It is to ensure high earners do not get excessive tax relief essentially.

Re: Pensions allowance and relief - returned from overseas

Posted: Sun Feb 10, 2019 5:14 pm
by LeonFer
Hi thank you for your reply.
Just to clarify, yes my earnings are over £40k. I am actually over the adjusted income threshold so will have a tapered allowance in the current tax year. Hence wanting to see if I can use up any carry forward allowances from previous years since my 18/19 allowance will be substantially less than £40k, despite living overseas during those years and not having any UK earnings or pension contributions into schemes i have been a member of prior to going abroad (either personal or employer).

I understand from your reply that the relief applicable to contributions is based on a maximum contribution to 100% net earnings in the year (nothing to do with prior years earnings). Also the allowance carry forward is not related to earnings in any given year but is based on total contributions in the given years and subject to being a member of a pension scheme (whether contributions have been made or not)

So i conclude from your note that I can make a contribution ie 18/19 in theory up to 100% earnings that would be entitled to relief, and that the amount I can contribute can also use (and is limited by) the carry forward of £40k p.a. from prior years over and above my 18/19 allowance (minus any other e.g. employer contributions over the 18/19 allowance) - is that right?

Re: Pensions allowance and relief - returned from overseas

Posted: Sun Feb 10, 2019 8:33 pm
by AdamS93
Yes, that’s correct.

It is irrelevant what you have earnt in previous years.

You can contribute what you like, but there will be no tax relief beyond 100% of your net relevant earnings.

If you contribute more than the available annual allowance (including carried forward allowances) you will face an annual allowance charge.