Carry forward remains available in the usual way, so up to £40,000 can potentially be carried forward from 2015 to 2016, 2016 to 2017 and 2017 to 2018. However, in any tax year in which the individual’s annual allowance has been reduced by application of the taper, only the balance of the tapered annual allowance can be carried forward to future tax years.
Case study
Sam has his annual allowance reduced to £15,000 for 2016 to 2017. His total pension funding for the tax year is a single payment of £10,000 gross to his self-invested personal pension.
He has the balance of £5,000 available to carry forward.
Non-UK resident
Individuals who have been a non-UK resident for a period of time are able to carry forward unused annual allowance from tax years when they were not UK resident, as long as they were a member of a registered pension scheme at some point in the tax year being carried forward from.
To explain, an individual with a personal pension that they started before leaving the UK, or a person leaving the UK who has deferred benefits within a final salary scheme, will be eligible to carry forward their unused allowances from the previous three tax years in the normal way once they return to the UK.
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.
Case study
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.