Carry Forward is a tax rule that allows you to catch up on your unused pension contributions. It enables you to carry forward unused annual allowance from the previous three tax years to the current tax year.
3 key Points
- The standard annual allowance for the current and next tax year (2019/20 & 2020/21) is £40,000.
- Your earned income must be at least the total amount you wish to make personal contributions in this tax year.
- That last point doesn’t apply if the contribution is being made by your company – more information on this HERE and HERE
Some Times to Use Carry Forward
- You’re earning more than £40,000 in the 2019/20 tax year and want to pay a larger personal pension contribution.
- Your employer wants to make a large pension contribution for you.
- You want to take advantage of higher rate tax relief in a good earnings year.
Other Important Points
- You must have been a ‘member’ of a registered pension scheme at some point during the year you are carrying forward. (A ‘member’ can include a plan that you may no longer be contributing to).
- You have to use up the current year’s annual allowance to use carry forward.
- Then, unused allowance is used up starting with the earliest year first.
- If you’ve taken pension benefits since 2015 you won’t be able to use carry forward except if you meet certain conditions.