What is Carry Forward?

5th February 2019
carry forward

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

  1. The standard annual allowance for the current and next tax year (2019/20 & 2020/21) is £40,000.
  2. Your earned income must be at least the total amount you wish to make personal contributions in this tax year.
  3. 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.

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Risk Warnings

This article and the information on this website is not personal advice. It’s only intended to give you a brief summary or highlight a particular issue for you to investigate further. It is based on our current understanding of legislation and HMRC guidance which can change and is correct as of the date of the post.

If you’re in any doubt whether a particular course of action is suitable for your circumstances, you should seek professional advice. Tax rules can change and any benefits depend on individual circumstances. And, if you are unsure any reliefs are applicable to you, you should consult your accountant or HMRC.

The value of investments and any income from them can fall as well as rise, so you could get back less that you put in. Past performance is not a guide to the future. It cannot provide a guarantee of the future returns of a fund.

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