The amount that most savers with sufficient earnings can invest into a pension each year with tax relief is capped at £40,000. But if you have more cash available to invest for retirement, unused allowance from the previous three tax years can be carried forward and used in the present tax year. In fact, you could add up to £130,000 extra to your pension this tax year by using carry forward and benefit from up to £58,500 in tax relief1.
Carry-forward is a valuable tax-planning tool that allows investors to make large pension contributions without incurring a punitive tax charge for exceeding their annual pension allowance. If you have used up all of your 2016/17 pension allowance, you can use any unused allowance from 2013/14, 2014/15 or 2015/16 and still benefit from tax relief at your highest marginal rate.
Individuals fully utilising this year’s pension allowance should be aware that any remaining allowance from 2013/14 tax year will be lost after 5 April 2017.
The final months of the year are a time to review tax planning opportunities and to make sure annual tax exemptions, allowances and reliefs are not lost. However, with a Budget looming, it could make sense to top up your pension sooner rather than later.
1 You would need to have £130,000 of income subject to 45% tax for this to apply. Example excludes current year’s contribution. Anything over basic rate tax relief may need to be claimed via the annual tax return.
The value of an investment with St. James's Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.
The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief depends on individual circumstances.