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Where Taxpayers and Advisers Meet

Pension contribution allowance

Jupiter01
Posts:51
Joined:Tue Jul 11, 2023 8:11 pm
Pension contribution allowance

Postby Jupiter01 » Tue Jul 11, 2023 8:35 pm

Can I please have your input on my understanding of the above. I’ve never maxed out my pension allowance and understand that I can use the unused capacity of the last 3 years.

I have had a workplace pension for 30 years and am now starting a SIPP with Vanguard. It’s the latter that this question relates to.

Firstly, what’s included in this annual allowance? My understanding is that it’s my contribution, employers contribution and the automatic tax relief that the pension provider fetches. It does not include the further 20% I claim through Self Assessment as I am a higher rate tax payer. Correct?

Assuming the above is correct, I’ve used around 12k for each of the last 3 years. This means that I can theoretically contribute £114k into my SIPP this year. Correct?
Unfortunately I can’t as that exceeds my annual salary but want to understand the principle.

Let’s say I contribute 80k this year, which year does the 20k get used from? Ideally I would want it to be the first year as it then means that I can use the spare capacity of year 2-3 next year. Hope that makes sense.

Also, when I put a figure like this in my Self Assessment and am owed 15k from the tax man - as an example - am I going to freak out the tax man?

I appreciate that there’s quite a bit packed into this question. I am a newbie to the forum and pensions!

darthblingbling
Posts:698
Joined:Wed Aug 02, 2017 9:09 pm

Re: Pension contribution allowance

Postby darthblingbling » Wed Jul 12, 2023 7:05 pm

Assuming all direct contributions schemes, it's essentially all inputs into the schemes for that tax year, which will include the top up.

Will it freak out the taxman if you put a ridiculous sum in, it may be flagged for review yes, but so long as it's accurate you should have nothing to worry about and you should document your carry forwards and maybe include a WSN confirming what amounts have been carried forward.

Jupiter01
Posts:51
Joined:Tue Jul 11, 2023 8:11 pm

Re: Pension contribution allowance

Postby Jupiter01 » Thu Jul 13, 2023 3:28 am

Assuming all direct contributions schemes, it's essentially all inputs into the schemes for that tax year, which will include the top up.

Will it freak out the taxman if you put a ridiculous sum in, it may be flagged for review yes, but so long as it's accurate you should have nothing to worry about and you should document your carry forwards and maybe include a WSN confirming what amounts have been carried forward.
Many thanks. With the carry forward, after I’ve used the current years’ allowance, which year gets used next? Year 3 or year 1? I think it will be advantageous for future years if the earliest year was used first.

darthblingbling
Posts:698
Joined:Wed Aug 02, 2017 9:09 pm

Re: Pension contribution allowance

Postby darthblingbling » Thu Jul 13, 2023 7:39 am

It's on a FIFO basis


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