HMRC relaxes pension ‘carry forward’ rules

Author: Rachel Dalton
IFAonline | 28 Nov 2011 | 14:03

Categories: Investment| Pensions

Topics: lifetime allowance| Pensions tax| HMRC| Aj Bell

HMRC logo

Her Majesty’s Revenue and Customs (HMRC) has altered its interpretation of annual allowance rules to let investors save more this year.

Under rules that came into force in April this year, investors would are allowed to "carry forward" their annual allowance (AA) on pension contributions from the previous three years to avoid paying high tax charges on contributions of more than £50,000 this year.

Previously, these rules were interpreted so that investors who saved more than £50,000 in 2009/10 or 2010/11 would use up some of their AA from previous tax years, reducing what they could carry forward.

However, HMRC has confirmed that AA from earlier tax years will not be used up by large contributions in 2009 and 2010.

AJ Bell's technical marketing manager Gareth James set out an example of an investor who paid in £100,000 in this tax year and £110,000 in 2010/11.

This investor would therefore need to carry forward £50,000 from previous tax years to avoid an AA tax charge.

"Using the previous interpretation of the rules they did not have any AA available because the contribution paid in 2010/11 used up all of the AA from the previous two tax years, so they would face a tax charge," said James.

"Using the new interpretation the large contribution in 2010/11 does not have any impact on the AA available from the earlier tax years; they still have £60,000 carry forward still available, and so do not face a tax charge."


Previous Rules

Year  Paid in AA used by 2010 contribution  AA available 
 2008/09  £20,000 £30,000  £0
 2009/10  £20,000  £30,000  £0
 2010/2011  £110,000  £50,000  £0

 Carry forward available



New Rules

 Year Paid in AA used by 2010 contribution  AA available
 2008/09  £20,000  £0  £30,000
 2009/10  £20,000  £0  £30,000
 2010/11  £110,000  £50,000  £0
 Carry forward available      £60,000




More investment news

Related briefings

Recommended reading



  • Comments
  • Print
  • RSS
  • Share
blog comments powered by Disqus

Related articles

Most Read

Audio / Visual

Coffee Lounge

Who picked up the gongs this year?

Protected Product Review Awards 2013

Who picked up the gongs this year?

Advisers and providers gathered at the Grand Connaught Rooms in London on 20 November to celebrate the ingenuity and the graft displayed in the protected product arena throughout the last 12 months. These awards are growing in popularity every year, and our congratulations go to the winners and highly commended.


event logo

British Mortgage & Protection Senate

11 Sep 2014 - 12 Sep 2014

Surrey, UK

event logo

Managed Solutions Focus 2014

17 Sep 2014 - 18 Sep 2014

London & Manchester, UK

event logo

Fund Management Summit 2014

23 Sep 2014 - 24 Sep 2014

London, UK



Should a permitted investment list be reinstated for SIPP providers?