Contributing to your pension over the Annual allowance

Wildcherry

Hi everyone,

I am aware of the annual allowance, tapering, carry forward etc...

I am just getting my head around what is stopping someone making a large lump sum contribution to their pension (say £500,000), get the tax relief on what they can and then get no relief on the rest? Assuming their is no LTA issues and without knowing the implications beyond this, it seems to me that someone could do this as a way of getting money out of their estate for IHT purposes?

What am i missing here?

Thanks

Wild

Gustavo_Fring

Do they have the earnings to justify a £500K contribution?

Suse1969

And if they can make it as an employer, wholly and exclusive rules?

Jona

In theory yes @Wildcherry

But on the value above BR relief they will pay 40% or 45% AA charge (and assuming no LTA issue) then this is the same as or worse than 40% IHT.

If they then die past age 75 (probable if in average health) any beneficiary drawing on the funds will also pay tax at their marginal rate 0, 20, 40, 45%

So some of the contribution could attract 90% tax.........

Oldhandnewhand

@Wildcherry said:
Hi everyone,

I am aware of the annual allowance, tapering, carry forward etc...

I am just getting my head around what is stopping someone making a large lump sum contribution to their pension (say £500,000), get the tax relief on what they can and then get no relief on the rest? Assuming their is no LTA issues and without knowing the implications beyond this, it seems to me that someone could do this as a way of getting money out of their estate for IHT purposes?

What am i missing here?

Thanks

Wild

Individuals have never been able to do that, under "old rules" an employer, and especially a company, could fund a new shcme for prior service on the very last day, I did that once with a SASS, about 900K with a two year spread for CT, no more I'm afraid. It was effective for IHT up to a point as the cash wouldn't have (most likely) received BPR.

Vicki_Hardy2

Good morning
Does anyone use a really good, robust carry forwards calculator/spreadsheet that works for all scenarios? Do not want to rely on provider calculators but the one we use falls over when lots of carry forward used in previous years. Would anyone be happy to share a good one?
Have a great day!
Vicki

Nath

I use a combo of manual calcs initially then checking this via the Pru tapered/CF calculator and also the Cashcalc one. I find it easier to plug into the Pru one first to get each years taper/CF etc and then you can plug it all into the cashcalc one.

Vicki_Hardy2

Thank you Nath - it seems that there is no such thing as the ultimate spreadsheet!