CPPIB Cash in Lieu Allowance Guide

Carry Forward – An Example

• Any unused pension AA can be carried forward from the previous three (3) years to help accommodate any excess contribution above the AA. • The current year’s AA must be used first (before any carry forward). Thereafter, any unused AA from the third year back is used, followed by the second and finally, the previous year. • The following simplified example explains more:

Total Pension Contributions Paid (Company and Personal)

Annual Allowance in Year

Spare Allowance for ‘Carry Forward’

Tax Year

Total Income

2016/2017

£100,000

£20,000

£40,000

£20,000

2017/2018

£110,000

£20,000

£40,000

£20,000

2018/2019

£120,000

£40,000

£40,000

£0

2019/2020

£360,000

£30,000

£10,000

£0

2020/2021

£360,000

£24,000

£4,000

£0

2021/2022

£360,000

£24,000

£4,000

£0

2022/2023

£360,000

£4,000

£4,000

£0

2023/2024

£360,000

£10,000

£10,000

£0

• Please note that between 2016/2017 and 2019/2020 inclusive, tapering started when incomes exceeded £150,000 - and ended at £210,000. The minimum tapered contribution was £10,000 in these years. • Between 2020/2021 and 2022/2023 inclusive, tapering started at £240,000 and ended at £312,000. The minimum tapered contribution was £4,000 in these years. • From 2023/2024 onwards, tapering starts at £260,000 and ends at £360,000. The minimum tapered contribution is £10,000. 1. The individual is a consistent higher earner. Full tapering has applied from 2019/2020. 2. The individual was working within the AA until 2019/2020 when the AA was exceeded by £20,000. However, there was £20,000 of unused AA from 2016/2017 (the third year back). This was carried forward into 2019/2020 to justify the excess contribution and legitimately avoid any AA tax charge. 3. In 2020/2021, the AA was again exceeded by £20,000. The spare AA from 2017/2018 was carried forward to justify the excess contribution. 4. In 2021/2022 the AA was again exceeded by £20,000. There is no remaining AA that can be carried forward. This meant that an AA tax charge of £9,000 was due (£20,000 x 45%). 5. From 2022/2023, contributions have been deliberately limited to the minimum level so not to exceed the AA.

Please note that you must have had a UK approved pension arrangement in place during the previous three (3) years to carry forward although there does not have to be any contributions made during these years.

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