How the tapered annual allowance impacts on carry forward

The calculations are easily muddled so its best to separate the two tasks. Here’s a reminder.

The tapered annual allowance came into force in the 2016/17 tax year so if your client has total earnings/income (approx. £100,000 as a starting point) in that tax year then you will need to obtain information from their accountant. Ask for a P60 or a copy of the tax return. You will also need total earnings and or income information from 2017/18 and 2018/19. Remember its total earnings or income so pension income, dividends, property rental income, P11d benefits etc are all included in the definition.

With the income information, together with details of employee or personal and employer pension contributions made, you can then calculate threshold and adjusted income for each tax year so you can see what the actual allowance is for each of the tax years (2016/17, 2017/18 and a best estimate for 2018/19).

Next, obtain a pension savings statement for each scheme that your client has been contributing to. The pensions savings statement will give you the pensions input amount for each of the last three tax years. You can then compare the pensions input against the unused allowances subject to the tapered cap for each tax year, for this and the last three tax years to see if carry forward can be utilised before the end of the tax year.

The good news is that come 6 April 2019 the pre/post alignment tax year of 2015/16 falls away.

Who said pensions are simple?