Pension Carry Forward as PAYE

[matt21]

Hi all

I would like to put some money into my pension by using previous years unused allowance. Ideally I would like to put money in from 3 years ago to keep the option open for future years. I am a PAYE employee.

How do I go about doing it? I see in many places you claim via self assessment, but is it possible as on PAYE? Do I contact HMRC or my pension provider to initiate?

Once I have put the money in, how do I get the taxed amount back? I understand the pension is topped up by the 20% and any difference based on my tax rate is reimbursed to me. Is this correct?

Thanks!

[Peterpetrole]

I have exactly the same question, any help would be appreciated cheers

[otolith]

I did this for 23/24. My pension provider has a portal, and I just made an additional contribution through that. I should get it back via my tax self assessment, but I realise that most other PAYE people don't have to do one of those, and I'm not sure what the process is if you don't. They still haven't calculated my tax for that year, mind, though I did submit it close to the deadline.

[otolith]

(Oh, and you can't choose the way it is applied - you use up your allowance for the current tax year first, then any unused from the previous year, then from the year before that, and so on. So effectively if you don't use up the unused allowance for the third year, you lose it)

[Mr Pointy]

Note you can only start using up unused allowance from previous years once you have used up all of the allowance for the current year (£60k) and you must have earned enough in this tax year - crudely if you earn £80k you can use £20k of carry forward.

[Peterpetrole]

otolith said:

I did this for 23/24. My pension provider has a portal, and I just made an additional contribution through that. I should get it back via my tax self assessment, but I realise that most other PAYE people don't have to do one of those, and I'm not sure what the process is if you don't. They still haven't calculated my tax for that year, mind, though I did submit it close to the deadline.

Cheers, can I ask which provider this was, the system for claiming tax back isn't leaping out at me on the providers websites I've googled.

[okgo]

Isn’t it the case that you can elect to do self assessment regardless of whether you make above £150k PAYE?

[otolith]

Peterpetrole said:

Cheers, can I ask which provider this was, the system for claiming tax back isn't leaping out at me on the providers websites I've googled.

It was Nest, but they don't handle the tax refund side, just taking the payment, you need to do that yourself with HMRC.

[DoubleSix]

otolith said:

(Oh, and you can't choose the way it is applied - you use up your allowance for the current tax year first, then any unused from the previous year, then from the year before that, and so on. So effectively if you don't use up the unused allowance for the third year, you lose it)

Not quite. The order is current year, then oldest available year….

[otolith]

DoubleSix said:

otolith said:

(Oh, and you can't choose the way it is applied - you use up your allowance for the current tax year first, then any unused from the previous year, then from the year before that, and so on. So effectively if you don't use up the unused allowance for the third year, you lose it)

Not quite. The order is current year, then oldest available year .

I may have misinterpreted "earliest" then to mean "youngest" rather than "first" - it wasn't relevant to me, I used up everything I had.

[DoubleSix]

matt21 said:

Hi all

I would like to put some money into my pension by using previous years unused allowance. Ideally I would like to put money in from 3 years ago to keep the option open for future years. I am a PAYE employee.

How do I go about doing it? I see in many places you claim via self assessment, but is it possible as on PAYE? Do I contact HMRC or my pension provider to initiate?

Once I have put the money in, how do I get the taxed amount back? I understand the pension is topped up by the 20% and any difference based on my tax rate is reimbursed to me. Is this correct?

Thanks!

OP, if you are making a personal contribution through payroll (salary sacrifice or Net Pay), there's no further tax relief for you to claim as you are automatically receiving tax relief at your marginal rate of income tax. Contact your payroll department in the first instance.

If you are making a personal contribution directly to the pension, then you will automatically receive 20% relief applied by the pension provider (relief at source), with any further relief being claimed via your tax return.

A word of caution: carry forward can get complicated, particularly if you are attempting this mid-way through the tax year, as you will need to account for employer and employee contributions as yet unpaid. Your understanding of pensions is quite basic and the scope for error is significant.

Edited by DoubleSix on Monday 7th July 13:58

[okgo]

Is there actually a relatively pain free way of checking your unused allowance? I have a guy that does my tax returns who said he could help but would require me to do all the legwork - it didn’t look entirely straightforward, obviously any normal business or similar would allow you to easily have a figure spat out hut HMRC isn’t anything like how any modern platform would operate it feels!

Is it a case of checking back through your actual contributions/employer contributions month by month to deduce a number?

I guess also if you do pay in too much via Sal sac and are later in the year tapered does the system automatically use up an old carryover or is this again manual?

I’ve had the annoying situation of going in and then out and now back into taper zone and sometimes I won’t know how that looks until very late in the day given RSU’s make up a lot of my income.

[DoubleSix]

okgo said:

Is there actually a relatively pain free way of checking your unused allowance? I have a guy that does my tax returns who said he could help but would require me to do all the legwork - it didn t look entirely straightforward, obviously any normal business or similar would allow you to easily have a figure spat out hut HMRC isn t anything like how any modern platform would operate it feels!

Is it a case of checking back through your actual contributions/employer contributions month by month to deduce a number?

I guess also if you do pay in too much via Sal sac and are later in the year tapered does the system automatically use up an old carryover or is this again manual?

I ve had the annoying situation of going in and then out and now back into taper zone and sometimes I won t know how that looks until very late in the day given RSU s make up a lot of my income.

Hi okgo,

Not really. It's not too challenging if you have a single workplace scheme. However, if you were perhaps accruing benefits in a DB scheme and also a member of the workplace DC, whilst then throwing a bit into an online provider you can see how things might get more complex quite quickly...

So yes, it's a manual process normally.

The issues you describe are why people tend to do their pension planning close to the end of the tax year and why people like me get very busy around then

[5pen]

I used the HMRC calculator a few years back when I made a one-off payment that was over the annual limit. It's straightforward enough if you know your previous contributions.

Remember that you must have relevant earnings in the current tax year and have been a member of a registered pension scheme for the years which you wish to carry forward an allowance from.

https://www.tax.service.gov.uk/pension-annual-allo...

Edit - I forgot to add - the additional contribution was made via my employers payroll, so the tax situation was taken care of automatically.

Edited by 5pen on Monday 7th July 18:46

[matt21]

Thanks all.

Indeed my pension expertise is low. I was hoping I could put in a chunk of net income, and HMRC top it up based on tax to be refunded. It’s worth a lot of money so may get some expert help to avoid complicating matters

[FriedMarsBar]

matt21 said:

Thanks all.

Indeed my pension expertise is low. I was hoping I could put in a chunk of net income, and HMRC top it up based on tax to be refunded. It s worth a lot of money so may get some expert help to avoid complicating matters

This calculator might help

https://www.hl.co.uk/pensions/tax-relief/calculato...

[TheHoof]

I have a related question....

I had a company provided pension plan 3 years ago but for various reasons, haven't made any contributions for the last 3 tax years.

Is there any reason I couldn't open a brand new SIPP today and put the over-contributions to use unused prior year contributions into that new SIPP? Or do the contributions have to be made into a pension plan that was open during that 3 year period?

I assume I can go the new SIPP route.

[DoubleSix]

Absolutely, you could. To use carry forward you just have to have had a UK pension for the period in question. It doesn't have to be the pension you are now funding.

In theory, you could add 200k if you have the relevant earnings and the unused carry forward to do so.

If you are a director, the relevant earnings rules wouldn't apply and instead your accountant could provide guidance around the 'wholly and exclusively' test.

[TheHoof]

Super. Thanks DoubleSix!