Non tax payer - Pension contribution carry forward and tax relief at source.

From HMRC website; Non tax payers can get tax relief at 20% on the first £2,880 paid into a pension each year if both the following apply, 1, low income non tax payer and 2, pension provider claims tax relief (20%) at source. My query is, assuming no prior year contributions can carry forward be applied and contributions made by a non tax payer (£2,880 per year) for prior years and 20% tax relief at source be claimed by the pension provider for each of those years ? The pension provider themselves is unclear !

Hi,
 

If you are a non taxpayer and you meet the 2 criteria in your question, you can pay up to £2800 into your pension scheme and your pension provider can claim up to 20% tax relief for you, from HMRC. Thank you.

Hi, thanks for the reply, My query was second paragraph on the original post; ."...assuming no prior year contributions can carry forward be applied and contributions made by a non tax payer (£2,880 per year) for prior years and 20% tax relief at source be claimed by the pension provider for each of those years ?" Thank you.

Hi Simon D,

Sorry no.  

Your annual allowance is the limit on the amount of pension savings that can be made to all your pension schemes in a tax year before you have to pay tax on them.

This can be from a: defined contributions arrangement - where your pensions savings is the total contributions you (or a third party like your employer) have made, defined benefits arrangement.

Where your pension savings is the increase in the value of your promised benefits under the pension scheme, from the start to the end of the period your pension savings are measured (from 2016 to 2017 this is the tax year).  

You will not be taxed on pension savings over your annual allowance if you have enough unused annual allowance from previous years to carry forward.

You can carry forward unused allowance from the 3 previous tax years.

Your annual allowance for a non tax payer is £2800.00, so there is nothing left to carry forward.

Thank you. 

This response from the HRMC admins on this topic contradicts themselves. The amount from the HRMC webstate states £2880, not £2800 as the admin states. (i.e. £3600 gross is £2880 net with 25% relief) The question (which I also have as well as the original poster) is still unanswered. let me rephrase the original question to give HRMC admin a binary option to answer this question. I am a non taxpayer, but have had a pension, albeit unsued, in all the preceding years. I paid £0 into all my pensions 3 years ago. £0 into all my pensions 2 years ago. £0 into all my pensions 1 year ago and £2880 into all my pensions this tax year. If unused allowances are carried forward from the 3 previous tax years as stated, then can I: (a) pay an additional £2880 multiplied by 3 (£8640) into my contributions this year? (i.e. carrying forward this unused £2880 allowance) or (b) not pay any additional contributions as the £2880 amount is not actally an allowance, it is use-it-or-lose-it, and the allowance for any non-tax payer is £0 for the previous tax years, so there is nothing to carry forward?

This question is very clearly put and I too would appreciate a clear reply to it please. Just like HMRC Admin in an earlier reply,my SIPP provider has only copied and pasted a generic irrelevant non-answer to me!

Hi S Hughes,

The carry forward of unused allowances is only applicable when you have exceeded your annual allowance of £40,000 to reduce any pension savings tax charge that may be due. You can only claim relief on pension contributions in the actual tax year that they are paid and in your case your maximum will be £2880 as a non tax payer. You are correct in that it is not an allowance, but a rleief, and it is as you say a use-it-or-lose-it scenario.

Thank you.

 

New question please As a non earner but tax payer at 40% If I pay £2880 into a sipp & get contribution grossed up by pension provider to £3600, can I then claim a further 20% tax relief via my self assessment return?

Hi Jeffrep
Yes.
Thankyou.

To be 100% clear. Let's say someone is now a non-tax payer this tax year, but they were an employed tax payer the last three years. Assume they had an existing qualifying pension scheme for every year involved and that they have not made any pension contribution for any year involved: 2023/24 Retired, Non-Tay payer 2022/23 Employed, Tax payer 2021/22 Employed, Tax payer 2020/21 Employed, Tax payer I appreciate they could only contribute £2,880 this tax year. Could they use any of the unused annual allowance for any tax year listed?

Hi
The unused allowance is only applicable if you have exceeded the annual allowance and paid more into your pension than 40k. If this is the case then yes. if you are refering to normal contributions, tax relief os only due in the year payment is made.

Hello, I just wanted to check some calculations I have made regarding carry forward. My taxable income for years from 2020/21 onwards are: - 2020/21 £12,014 2021/22 £11,313 2022/23 £11,310 2023/24 £7,573 2024/25 Nil as retired I have been a member of a personal pension in each of these years but made no contributions. My understanding is that I can carry forward contributions for each year to the total of the income earned as it is so low. That figure in this tax year would be £42,210 gross (£33,768 net). I also understand that I could contribute £19,587 from 2020/21 & 2023/24 in the 2023/24 tax year and then contribute in 2024/25 a total of £26,223 for the tax years 2021/22, 2022/23 and 2024/25. I understand that I am able to contribute £3,600 gross in 2024/25 even though I have no taxable income. Are my assumptions correct? Thank you.

Hi,
Tax relief on pension payments is the maximum of your combined employment / self employment income or £40000 (£60000 in 23/24), which ever is lower.  
If you did not pay into a pension scheme in the previous 3 years, the maximum you can carry forward from each tax year is your combined employment / self employment income or £40000 (£60000 in 23/24), which ever is lower.
Thank you.

Thank you for your reply. Please can you confirm that if I make a carry forward contribution of £33,768 as a net payment covering 2020/21 to 2023/24 that it will be grossed up £42,210 by my personal pension provider reclaiming £8,442 from HMRC? I need to be very clear whether this payment will qualify for tax relief before I cash in premium bonds to cover the amount.

Hi JohnTom,
We cannot provide an answer to your question, as we cannot give you financial advice.
You will need to seek professional advice on this matter.
Thank you. 

Hello again. I am not seeking financial advice and therefore do not require a financial advisor. I am asking if it is acceptable according to current inland revenue rules for me to use carry forward of unused relief to make contributions for previous years and have them treated as being eligible for tax relief i.e. they will be grossed up. Please could you confirm whether inland revenue rulings allow this?

Hi JohnTom

You can carry forward  any unused annual allowance in order to avoid a tax charge so that you can make a payment more than the annual allowance of £60,000 - HS345 Pension savings — tax charges (2023)

Thank you

Hi there, I wonder if you can answer a simple additional pension contribution query for me? My total earnings for 2023/24 were £44313.75, my employer's & my pension contributions came to a total of £24837.20, therefore I calculate the scope for further contributions to be £19476.55, limited by total earnings rather than the £60k limit… When I make the additional contribution do I make the figure to be £15581.24, so that when 20% tax relief is applied (£19476.55 x 20%) = £3895.31, it brings the overall annual contribution to exactly £44313.75 or do I just make a straight contribution of £19476.55 and then the tax relief is added afterwards, in effect I have ‘physically’ contributed £44313.75, but the ‘actual’ pension input becomes £44313.75 PLUS £3895.31? Many thanks for any clarification.

Hi,
Yes you make the net payment as this will be grossed up.
Thank you.