Annual allowance and carry forward

Doticasie

Scenario- Client contribution - £45K
Employer contribution- £20K
Client NRE- £45K

Can client carry forward unused allowance from previous yr to obtain tax relief on his contribution?

benjaminfabi

The client will get tax relief on the contribution whether he has carry forward or not. Having carry forward to cover the excess £5k will stop the annual allowance tax charge applying later in the tax calculation to claw it back.

So yes, the client can carry forward if he has it and stay within the annual allowance.

les_cameron

A little light bedtime reading - https://www.mandg.com/wealth/adviser-services/tech-matters/pensions/tax-relief/tax-relief-annual-allowance

Doticasie

Cheers both-was under the impression annual allowance was linked to his nre so he could not carry forward

les_cameron

@Doticasie said:
Cheers both-was under the impression annual allowance was linked to his nre so he could not carry forward

A common misconception. Annual Allowance and tax relief are two different things and work separately (though interrelated).

Your person can do £45k as that is 100% of his relevant earnings and get full tax relief.

You then have a look at Annual Allowance. HIs employer is doing £20k.

So AA usage is £65k and you need c/f or there will be an annual allowance charge.

In principle if you earned £660,000 and only had £60k AA available you can still do £660,000 and get full tax relief. It's just that you then have an AA excess of £600k coming along to generate a tax charge