Pension Pot

For the last four years my pension pot, which is rather small, has lost money and I am tempted to withdraw it and place it in an ISA or other fixed account which will make me more ! I know that I can withdraw 25% tax free , but any other monies would incur TAX . After a serious health issue I have not had an income since 2018 , and became a pensioner in 2022. AM I correct in thinking that my TAX free allowances for the period 2018 to April 2024 would ( 6 years) 75000 less any pension paid in last year or so , be set against this pot and any taxable portion drawn ?

No replies, is the unused tax allowance retained and usable for the usual six years retrospective. ??????

Hi,
You cannot use any of yor earlier years personal allowances to reduce the tax due. you would only be entitled to the allowances in the year the pension is taken. should this be over £12570, your pension will be taxed.
Thank you.

I believe using HMRC online tools I am entitled to open a SIPP with a contribution of £60k for this year and £4k allowance for each of the last three years = £72k. Can I confirm that this is the amount I pay into the SIPP and the SIPP provider will claim basic relief on this amount? Or do I need to net it down myself to £60k and they claim the additional 20% on this lower amount. How to I claim additional tax relief as I was a higher rate tax payer for all 4 years?

Hi christy swords

Please refer to guidance at Tax on your private pension contributions

Thank you

I have referred to that guidance. I believe that - for this year - I put in the £60k for the amount I've paid in using this year's allowance with the 20% top up from the pension provider. What I still cannot work out - having read the guidance - is whether I can go back and claim higher rate relief for the £4k carry forward contributions I am entitled to make for each of the previous 3 years. Do I have to go back and amend my return online (for 2022/23)? I don't think that is an option for the previous two years - do I have to write to HMRC? Or am I simply not entitled to that higher rate tax relief for those years at this point? I really appreciate any clarity you can give as I've been looking everywhere for an answer to this.

Hi chris ford

Tax relief on pension contributions is only available in the tax year that the payment has actually been made.
If you are carrying forward unused relief in respect of the annual allowance, this is in order to reduce any potential pension tax charge.
As such based on that the £4k referred to would only be due tax relief if you made contributions of that amount.

Thank you

Did you have a pension fund in the previous three years or is the new SIPP you are proposing the first time that you have been a member of a pension scheme? If the new SIPP is the first/only scheme that you have been a member of then: - You will not have unused relief to bring forward from 20-21 to 22-23. - Your contribution for 23-24 would be limited to £60k (you pay £48k to the SIPP manager and they claim the basic rate tax relief of £12k from HMRC and add that to the SIPP pot). - In your tax return you would show grossed up pension contributions of £60k and the tax computation will give you the additional higher rate tax relief net of the 20% already claimed by the SIPP manager.

Hi Thanks for taking time to respond. I was a deferred member of a DB scheme for the previous years, which I think means I do qualify for carry forward. I am (fairly) confident, having read the guidance and used the HMRC calculator, that I can contribute £72k this year = £60k allowance, plus £4k for each of previous three years (based on my income level). Where I was not clear was whether - having put in that level of contributions in at March 2024 (on a net basis so £57.6k net which my provider has topped up to £72k) whether I should simply register that amount in my self assessment for 2023/24. Or whether I needed to go back and amend previous self assessment returns for 2020/21, 2021/22, 2022/23. I think from your reply to another thread, that the answer is I simply put in this year's self assessment not previous years. (I am sure you are right, although another HMRC respondent seemed to imply that I should go back and change previous forms, which I have set in train and may have to correct again) Assuming I just put the £72k in this years return, I am not sure whether that means the full £72k will get higher rate relief which I am entitled to or whether that is capped to the £60k. V helpful to get any advice as - for the life of me - I cannot seem to get the answer from the published guidance....

You will enter £72k on your 23-24 tax return and do not make any amendments to previous years. You might also want to add a note in the additional information section of the return to say that you are using the full annual allowance for 23-24 plus unused relief from the previous three years of 3 c £4k (though that is not absolutely necessary). Tax relief will be given on the £72k at your higher rate(s) for 23-24. For example, If excluding the pension contributions you are liable on (say) : - £100k @ 45% for 23-24 then you will get tax relief on £72k @ 45% [reduction in liability would be £18k - ie £72k x (45-20)%] - £50k @ 45% for 23-24 then you will get tax relief on £50k @ 45% & £22k @ 40% [reduction in liability would be £16.9k - ie £50k x (45-20)% + £22k x (40-20)%]

Hi chris ford

If you claim £72k personal pension relief in your tax return, you will increase your basic rate of £37700 band by £72000, to £109700.  
This will increase the amount of income taxed at 20%, reducing the income that would have previously been taxed at 40% or 45%.  
This will give you all of the tax relief you will be entitled to.

Thank you

Many thanks for the very clear responses on this topic - it has been very helpful.