Drewberry™ provide pensions, investment and insurance advice for Money to the Masses readers throughout the UK.

carry forward calculator 2017

Pension Carry Forward Calculator 2017

To encourage retirement saving, pensions are perhaps the one area where HMRC gives more often than it takes.

You receive tax relief on pension contributions at your highest marginal rate of income tax. So a higher rate (40%) taxpayer only has to put in 60p out of their own pocket to achieve £1 of pension contributions – HMRC tops up your contribution with a further 40p.

However, while pension tax relief provides a great incentive to save for retirement, the amount you’re allowed to put into a pension each year and still receive tax relief has been cut to prevent abuse of the system.

Today, the annual pension allowance for the 2017/18 tax year is £40,000 or 100% of your salary, whichever is lower. While you can contribute more than this, you won’t receive tax relief on any pension payments above the £40,000 ceiling.

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Reducing annual allowance: How much you can pay into your pension?

The government has cut the amount you can pay into your pension and still receive tax relief over the past decade to keep a lid on how much this relief costs the Treasury.

The pensions annual allowance increased every tax year between 2006/07 and 2010/11, from £215,000 to £255,000. However, the pension annual allowance was cut back drastically in 2011/12 to £50,000. It remained at £50,000 until 2014/15, when it was cut yet further, to £40,000.

 

Tapered pension annual allowance for high earners

The current pension annual allowance remains at £40,000, unless you’re a higher earner.

Introduced in the Summer Budget 2015, the tapered annual pension allowance for higher earners applies to anyone earning more than £150,000 per year.

High earners now see their annual pension allowance tapering down by £1 for every £2 they earn over £150,000, down to a minimum of £10,000 per annum.

On this basis, anyone with an annual income of £210,000 or more will receive the maximum annual allowance reduction of £30,000 and be left with an annual allowance of £10,000.

If you enjoy a pension-adjusted taxable income of over £150,000, you can use our calculator below to work out what your annual pension allowance will be from April 2017.

 

Pension Annual Allowance Calculator

Simply follow these quick steps to work out your annual pension allowance and receive a free expert guide to pension planning.
1
Annual taxable Income What is your annual taxable earnings less any charitable donations?
£
2
Monthly gross employer pension contributions How much does your employer contribute to your pension each year, if any?
£
OR
%
3
Monthly employee pension contributions
Gross contribution The figure which is on your pension statement.
Net contribution The figure which is on your bank statement or your payslip.
£
OR
%
You receive basic tax relief on your pension contributions at source. You have declared gross employee pension contributions of , is made up via the tax relief which means your personal contribution is only . You receive basic tax relief on your pension contributions at source. This means you have only had to contribute into your pension to receive an additional via the tax relief which uplifts your personal contribution to (%). You will also qualify for higher-rate tax relief on your contributions. This must be applied for via your annual self-assessment tax return. You will receive this tax relief in one of three ways: 1) as a tax rebate; 2) as a change to your existing tax code; or 3) as a reduction in the tax you might already owe to HMRC You will also qualify for higher and additional-rate tax relief on your contributions. This must be applied for via your annual self-assessment tax return. You will receive this tax relief in one of three ways: 1) as a tax rebate; 2) as a change to your existing tax code; or 3) as a reduction in the tax you might already owe to HMRC.
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Your First Name Enter your first name for your personalised results...
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Email Address Enter your email address for an instant personal illustration, and receive our exclusive Higher Rate Tax Payer Investment Guide.

Your pension annual allowance results

Your gross pension contributions are per year or of your Annual Taxable Income. With this level of pension contributions your adjusted annual income for the year is .

Taking account of any tapering of the annual allowance for high earners, the annual allowance available to you this year is:

£32,375.00 / £40,000.00 Maximum Annual Allowance

Due to the level of your Adjusted Annual Income your personal
Pension Annual Allowance will be reduced to .

Due to the level of your Adjusted Annual Income your personal
Pension Annual Allowance will be £10,000.00.

Given your Adjusted Annual Income is below the threshold you will still recieve 100% of your
Pension Annual Allowance ().

Due to the level of your Adjusted Annual Income your personal
Pension Annual Allowance will be reduced to £10,000.00.

As you're flexibly accessing your pension, you have a reduced annual allowance known as the Money Purchase Annual Allowance. Note that this is currently £10,000.00 but is set to fall to £4,000 after June 2017.

Your Contributions 2017-2018

Given the pension contributions you are making of this year it looks like you will use % of your available annual allowance ().

  -      - Tax Free Pension Contributions
  -      - Taxable Pension Contributions
It is important to note that given your pension contributions this year are greater than your annual allowance, you will be taxed on the excess contributions at your highest marginal rate.

Include unused allowance from previous years

Enter the total pension contributions you have made in the previous 3 tax years and calculate to see if there is any unused annual allowance you can carry forward to this tax year.

2014 / 2015:
2015 / 2016:
2016 / 2017:

This carry forward calculation for 2016/17 assumes your earnings were the same last tax year as they are in the current tax year. If your earnings have changed, this could affect the calculation.

Including your Carry Forward

You can potentially carry forward any unused Annual Allowance from the past three years and add this to your current year’s allowance. However, remember that tax relief is only available on pension contributions of a maximum of 100% of your annual taxable income in any given tax year.

Based on your current year’s Annual Allowance and your unused Annual Allowances from the past three tax years, the maximum permitted pension contribution you could make this year is:

+ =

  • this year's annual allowance
  • carry forward

Combining your Carry Forward with this years Annual Allowance you are able to make tax efficient pension contributions of up to .

Given your current pension contributions and including any carry forward you are using % of your available Annual Allowance.

/

neiladamsportraitround

Calculators like these are always helpful but they don’t beat talking through your situation with an experienced adviser. If you need any support and would like to talk through how an Drewberry adviser can help improve your tax position, don’t hesitate to call us on 0208 4327 333.

Neil Adams
Pension Specialist at Drewberry

IMPORTANT NOTES

You need to have a UK registered pension plan to be eligible for your annual pension allowance

Tax relief on pension contributions is at your highest marginal rate, this calculator takes account of the basic rate tax relief at source only.

If you've flexibly accessed your pension, you're subject to the money purchase annual allowance (MPAA). You cannot use previous years' annual allowance (referred to as pension carry forward) to increase your annual allowance once you're subject to the MPAA. You also can't carry forward any unused MPAA to following tax years.

To make the most of your Annual Allowance it may be wise to consider your personal circumstances before deciding upon your level of pension contributions in any given tax year. If you need financial advice please do not hesitate to contact us on 02084327333.

 

The Money Purchase Annual Allowance

If you start flexibly accessing your pension, you’re subject to a reduced annual allowance known as the money purchase annual allowance or MPAA.

From the start of the 2017/18 tax year, the MPAA was due to be cut further, to £4,000. However, this was placed on hold due to the June 2017 snap General Election and is likely to be applied by the end of the current tax year.

Pension Carry Forward and the Money Purchase Annual Allowance

Once you’re subject to the MPAA, pension carry forward is no longer available to carry forward previous years’ contributions to increase your money purchase contributions above the MPAA in the tax year you began flexibly accessing your pension. If you don’t use your full MPAA, you also can’t carry forward any remaining funds to the following tax year.

 

 

Pension Carry Forward: Regaining Unused Annual Allowance

Whether or not you’ve had your annual allowance tapered down, you can carry forward unused pension allowances from the past three tax years to boost your available pension allowance today.

While not exclusively for high earners hit by annual allowance tapering, pension carry forward is particularly useful for them because it offers a chance to significantly boost an annual allowance in the current tax year. For the highest earners, that annual allowance might be as low as £10,000.

Pension carry forward lets you use unused pension contributions for previous tax years

The table below demonstrates that the maximum available annual pension allowances from the past three tax years combined with the annual allowance from the current year. These four figures come to a total of £170,000.

Note that the below table assumes the person is yet to make any pension contributions for the years 2014/15-2017/18. Any pension contributions made during those years would be deducted from the maximum figure available in the tax year those contributions were made.

To start using pension carry forward, you must have already reached your maximum annual allowance in the current tax year. Thereafter, you start using the previous tax years’ allowances, starting with the earliest year first.

Tax Year

Max. Yearly Pension Allowance

2014/15

£40,000

2015/16

£40,000

2016/17

£40,000*

2017/18

£40,000*

Total

£160,000

*Subject to annual allowance tapering if your income exceeds £150,000

However, in any given tax year you can only contribute a maximum of 100% of your income to your pension. So in order to put £160,000 into your pension in 2017/18, a person would have to be earning £160,000 that year.

And as they have an income over £150,000, the tapered annual allowance means they can’t contribute the maximum £40,000 in 2017/18. Instead, they’d be limited to a contribution of £30,000.

How does pension carry forward work?

As such, the maximum annual pension contribution a person could make in the 2017/18 tax year with a salary of £170,000 per annum would be £150,000.

Use Drewberry’s 2017 Annual Allowance and Pension Carry Forward Calculator below to find out how the annual pension allowance and carry forward allowances apply to your situation.

The carry forward calculations are available once you’ve filled in your details to get your annual allowance for the current tax year.

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Neil
Pensions Advice

Robert
Income Protection
Pensions Advice UK by Drewberry

Need Pensions and Investments Advice?

If you don’t have any annual allowance left but still have money you’d like to invest in your pension, there are other tax-efficient investment options to consider, including:

  • Individual savings accounts (ISAs) – with a £20,000 ISA allowance in 2017/18, ISAs offer freedom from income tax and capital gains tax (CGT) on any gains
  • Venture capital trusts (VCTs) – an investment in a portfolio of very small companies, VCTs offer 30% tax relief on investments and no tax to pay on dividends or capital gains, all subject to a minimum investment term
  • Enterprise investment schemes (EIS) – an investment in a smaller company eligible for 30% tax relief and also free from inheritance tax, there’s no CGT to pay on an EIS and loss relief is available, all subject to a minimum investment term
  • Seed enterprise investment schemes (SEIS) – an investment of seed capital in small, early stage companies eligible for 50% tax relief and also free from inheritance tax, there’s no CGT to pay and loss loss relief is available, all subject to a minimum investment term.
tomconnerportraitround

Nothing is ever straightforward when it comes to retirement planning, especially if you’ve exceeded your annual pension allowance and carry forward limit.

If you’d like to find out more or to discuss any of these options with a regulated financial adviser, then don’t hesitate to call us on 02084327333.

Tom Conner
Director at Drewberry

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