Pension Contribution Limits & Carry Forward Allowance James Freshney Consultant Summer 2020
CONTRIBUTIONS
£40,000.00
• Greater of £3,600 gross and the amount of the individual’s relevant UK earnings • Subject to an annual allowance, which in 2020/21 is £40,000 • If the contribution is made by an employer, it is not restricted by UK relevant earnings
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UK relevant earnings
£3,600.00 CURRENT TAX YEAR
CONTRIBUTIONS
£40,000.00
£40,000.00
£40,000.00
£40,000.00
CURRENT TAX YEAR
TAX YEAR -1
TAX YEAR -2
TAX YEAR -3
• The unused amount can be carried forward for up to three years, starting with the current tax year and using up the earliest first
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CONTRIBUTIONS – MPAA
£40,000.00
• If you are in receipt of flexible income from a defined contribution pension, the amount you can pay into a pension may be reduced • This is known as the money purchase annual allowance or MPAA
£4,000.00 CURRENTANNUAL TAX YEAR MONEY PURCHASE ALLOWANCE
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CONTRIBUTIONS – Tapered Annual allowance
Tapered by £2 for every £1 above £240,000 Adjusted income £40,000.00
• E.g. Adjusted Income of £270,000 will reduce the annual allowance by £15,000 ((270,000 − 240,000)/2) • Subject to a minimum of £4,000
£4,000.00 TAPERED ANNUAL CURRENT TAXALLOWANCE YEAR
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CONTRIBUTIONS
£35,000
£26,500 £31,000
£40,000.00
• The carry forward allowance is the sum of the unused allowances • In this case, £129,500, subject to relevant earnings
£40,000.00
£15,000.00 £15,000.00
£40,000.00
£37,000 £40,000.00
£13,500.00 £13,500.00 £9,000.00 £3,000.00
CURRENT TAX YEAR
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TAX YEAR -1
TAX YEAR -2
TAX YEAR -3
ANY QUESTIONS?
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