However, if the person previously had a UK pension plan which has been transferred to a Qualifying Recognised Overseas Pension Scheme, or Qrops, so that they no longer have any funds left in a UK pension plan, then they can only carry forward from tax years up to the date of the transfer to the Qrops.
Alan’s only UK pension, which started in 2010, was transferred to a Qrops on July 1 2016.
In 2018 to 2019 he is able to carry forward from 2015 to 2016 and 2016 to 2017, but not from 2017 to 2018.
With the changes and transitional provisions applying in 2015 to 2016, here is further guidance on the effect this has on carry forward.
Situation in 2015 to 2016
The tax year split into two mini tax years.
- The pre-alignment tax year (April 6 to July 8 2015) – annual allowance £80,000, to offset against contributions made in Pips ending between these dates. If, before the Budget on July 8, the pension plan did not have a Pip aligned with the tax year, then it is not just a case of considering what pension funding/contributions were made between April 6 and July 8 – the relevant period runs from the start date of the Pip before April 6 2015.
For example, Anna has a PPP which, before the Budget, had Pips running from June 1 to May 31 each year.
The contributions that must be assessed against the £80,000 annual allowance are those made between June 1 2014 and July 8 2015 as she had two Pips ending in the pre-alignment tax year (June 1 2014 to May 31 2015 and June 1 2015 to July 8 2015).
2. Post-alignment tax year (July 9 2015 to April 5 2016), annual allowance zero, but any of the £80,000 not used in the pre-alignment tax year (as per the above) can be used in the post-alignment tax year but subject to a maximum of £40,000.
For example, David had pension funding totalling £30,000 in the pre-alignment tax year. £80,000 - £30,000 = £50,000 which must be capped at £40,000.
So he has £40,000 to use in the post-alignment tax year (plus any carry forward available from 2012 to 2013, 2013 to 2014 and 2014 to 2015).
Kate had £60,000 of funding in the pre-alignment tax year. £80,000 - £60,000 = £20,000 to use in the post-alignment tax year (plus carry forward as before).
In these examples, it is any part of the amount that could be used in the post-alignment tax year (£40,000 for David and £20,000 for Kate) but that is not used, that is available for carry forward to future years.
Do not forget that any unused annual allowance from 2015 to 2016 must be used before the tax year end on April 5.
Maximum that can be carried forward from 2015 to 2016 to future tax years
The amount available to carry forward from 2015 to 2016 to future tax years is the amount of annual allowance that could have been carried forward from the pre-alignment tax year to the post-alignment tax year less any premiums paid in the post-alignment tax year.
|Amount of pension funding in PIPs ending in the pre-alignment tax year||Amount of the £80k annual allowance available for use in the post-alignment tax year||Amount of pension funding in the post-alignment tax year||Amount available to carry forward from 2015/16 to future tax years|
Carry forward and tax relief
If unused annual allowance is being carried forward, the usual tax relief rules still apply to any contributions made.
Tax relief on employer contributions is subject to the usual wholly and exclusively test, and tax relief on personal contributions is limited to 100 per cent of the individual's relevant UK earnings for the tax year in which the contributions are actually paid (or £3,600 if greater).