This guide is for financial advisers only. It mustn't be distributed to, or relied on by, customers. It is based on our understanding of legislation as at December 2024.
Overview
All examples assume the following:
- The money purchase annual allowance doesn’t apply, and
- There’s been no benefit accrual or contributions paid under any other registered pension schemes during the period covered.
For further information see the Carry Forward and Tapered Annual Allowance sections of this guide
Liam made a large contribution to his personal pension plan in tax year 2021/22, carrying forward some unused annual allowance from the 2020/21 tax year. It’s now tax year 2024/25 and he wants to know how much unused annual allowance he can carry forward because he’s planning on making another large personal contribution. The TAA doesn’t apply to him. The table below shows his pension input amounts for the pension input periods ending in the previous four tax years and assumes there is no carry forward from any earlier tax years:
PIP ending in tax year |
Annual allowance |
Pension input amount |
Available to carry forward from current PIP |
Total amount to carry forward to next tax year |
|---|---|---|---|---|
2020/21 |
£40,000 |
£7,000 |
£33,000 |
£33,000 |
2021/22 |
£40,000 |
£70,000 (Uses £30,000 CF from 2020/21) |
Nil |
£3,000 |
2022/23 |
£40,000 |
£25,000 |
£15,000 |
£18,000 |
2023/24 |
£60,000 |
£65,000 (Uses remaining £3,000 CF from 2021/22 and £2,000 of the CF allowance from tax year 2022/23) |
Nil | £13,000 |
Liam can contribute up to £73,000 in tax year 2024/25 (£60,000 standard annual allowance for 2024/25 and £13,000 carried forward from 2022/23) without being subject to an annual allowance tax charge.
Unused annual allowance can only be carried forward from a year in which an individual was a member of a registered pension scheme. If Liam hadn’t joined a scheme until 2021/22 and the exact same contributions were made as above in tax years 2021/22, 2022/23 and 2023/24, this would produce the following figures:
PIP ending in tax year |
Annual allowance |
Pension input amount |
Available to carry forward from current PIP |
Total amount available to carry forward to next tax year |
|---|---|---|---|---|
2021/22 |
£40,000 |
£70,000 (An annual allowance tax charge would be due on any contribution over £40,000). |
Nil |
Nil |
2022/23 |
£40,000 |
£25,000 |
£15,000 |
£15,000 |
2023/24 |
£40,000 |
£45,000 (Uses £5,000 CF from 2022/23) |
Nil |
£10,000 |
In this situation, Liam can contribute up to £70,000 in tax year 2024/25 (£60,000 standard annual allowance for 2024/25 and £10,000 carried forward from 2022/23) without being subject to an annual allowance tax charge.
Lucy has been subject to the TAA since 2017/18, at varying amounts. Her current TAA is £10,000. She wants to know whether she has any unused annual allowance available to use in 2024/25 to maximise her contribution. She has already paid £10,000 in 2024/25.
PIP ending in tax year: |
TAA |
Pension input amount |
Available to carry forward |
Total amount available to carry forward to next tax year |
|---|---|---|---|---|
2021/22 |
£17,500 |
£17,500 |
Nil |
Nil |
2022/23 |
£15,000 |
£10,000 |
£5,000 |
£5,000 |
2023/24 |
£12,000 |
£12,000 |
Nil |
£5,000 |
Lucy can carry forward £5,000 from 2022/23, so she can contribute an extra £5,000, giving an allowance of £15,000 that can be paid in 2024/25 without attracting an annual allowance tax charge.
In tax year 2024/25, Barry’s employer wishes to pay in a large single contribution of £70,000 into his pension plan. A monthly employer contribution of £340 is also being paid on the 1st of each month and has been for a few years. They also paid in a lump sum of £40,000 in tax year 2021/22 and £45,000 in 2023/24. The table below assumes there is no carry forward allowance from any years before 2020/21.
PIP ending in tax year: |
Annual allowance |
Pension input amount |
Available to carry forward |
Total amount available to carry forward to next tax year |
|---|---|---|---|---|
2020/21 |
£40,000 |
£4,080 |
£35,920 |
£35,920 |
2021/22 |
£40,000 |
£44,080 (Uses £4,080 CF from 2020/21) |
Nil |
£31,840 |
2022/23 |
£40,000 |
£4,080 |
£35,920 |
£67,760 |
2023/24 |
£60,000 |
£69,080 (Uses £9,080 CF from 2020/21) |
Nil |
£35,920 (the CF remaining from 2020/21 drops away) |
The total pension input amount for 2024/25 would be £74,080 (the £70,000 single contribution plus £4,080 in respect of the regular contributions). Barry will have more than enough annual allowance to cover this due to the carry forward of £35,920 along with the £60,000 annual allowance for 2024/25.
Olive is a member of her employer’s GPP scheme, and she and her employer pay 5% each into the scheme. The TAA has applied to her since 2023/24 when she got a promotion.
For 2023/24, her salary was £260,000 so the total pension contribution was £26,000. Her only other income for that tax year was £1,000 in interest from her bank accounts. This means her adjusted income was £274,000 (£260,000 salary + £1,000 interest + £13,000 employer contribution). Her threshold income was £248,000 (£260,000 salary + £1,000 interest - £13,000 personal contribution). An adjusted income of £274,000 means her annual allowance was tapered to £53,000.
She wants to know how the TAA will affect her and whether she’ll be able to carry forward any unused annual allowance from previous tax years to allow contributions of 10% to continue, without incurring an annual allowance charge.
PIP ending in tax year |
Annual Allowance/TAA |
Pension input amount |
Available to carry forward |
Total amount available to carry forward to next tax year |
|---|---|---|---|---|
2020/2/10 |
£40,000 |
£6,000 |
£34,000 |
£34,000 |
2021/22 |
£40,000 |
£10,500 |
£29,500 |
£63,500 |
2022/23 |
£40,000 |
£12,000 |
£28,000 |
£91,500 |
2023/24 |
£53,000 |
£26,000
|
£27,000 |
£84,500 (the CF remaining from 2020/21 drops away) |
For 2024/25, the tapered annual allowance applies to individuals with an adjusted income of over £260,000. Olive’s salary will be £280,000 which would make the prospective total pension contribution £28,000. She estimates her bank interest will be £1,400 for 2024/25 which will make her adjusted income £295,400 (£280,000 salary + £1,400 interest + £14,000 employer contribution). Her threshold income will be £267,400 (£280,000 salary + £1,400 interest - £14,000 personal contribution). An adjusted income of £295,400 means her annual allowance will be tapered to £42,300.
Olive’s annual allowance in 2024/25 will be £126,800 (£42,300 tapered annual allowance + £84,500 carried forward). This is more than enough to cover the £28,000 contribution.