What you need to do if your member puts more than their annual allowance into their pension.
Overview
If your member’s savings go above the annual allowance they may need to pay an annual allowance tax charge.
You’ll need to test your member’s pension savings against the annual allowance using the:
- actual amount of contributions for defined contribution arrangements
- increase in the value of benefit rights for other types of arrangements (such as defined benefits)
You’ll also need to test your member’s money purchase pension savings against the money purchase annual allowance if you believe the member has first flexibly accessed a money purchase arrangement in certain circumstances.
If your member’s pension savings are more than the annual or money purchase allowance you’ll need to send them a pension savings statement.
Pension savings to use
You’ll need to know when the member paid into your pension scheme to decide how much to test against the annual allowance (also called the pension input period).
From 6 April 2016 onwards the pension input period is aligned with the tax year.
Read more about pension input periods in the Pension Tax Manual.
Carry forward unused annual allowance
Your members may be able increase their annual allowance by carrying forward any unused annual allowance from previous years.
| Current tax year | Tax years your members can carry forward annual allowance |
|---|---|
| 2023 to 2024 | 2022 to 2023, 2021 to 2022, 2020 to 2021 |
| 2022 to 2023 | 2021 to 2022, 2020 to 2021, 2019 to 2020 |
| 2021 to 2022 | 2020 to 2021, 2019 to 2020, 2018 to 2019 |
| 2020 to 2021 | 2019 to 2020, 2018 to 2019, 2017 to 2018 |
| 2019 to 2020 | 2018 to 2019, 2017 to 2018, 2016 to 2017 |
| 2018 to 2019 | 2017 to 2018, 2016 to 2017, and 2015 to 2016 (pre-alignment or post-alignment tax year). |
| 2017 to 2018 | 2016 to 2017, 2015 to 2016 (pre-alignment or post-alignment tax year), and 2014 to 2015. |
| 2016 to 2017 | 2015 to 2016 (pre-alignment or post-alignment tax year), 2014 to 2015, and 2013 to 2014. |
| 9 July 2015 to 5 April 2016 (post-alignment tax year) | 2012 to 2013, 2013 to 2014, 2014 to 2015 and the pre-alignment tax year. |
| 6 April 2015 to 8 July 2015 (pre-alignment tax year) | Previous 3 tax years. |
| 2014 to 2015 and earlier | Previous 3 tax years. |
There’s a cap on the amount of any unused annual allowance that can be carried forward from the pre-alignment tax year, depending on the individual’s circumstances for that ‘mini’ tax year.
There’s a different calculation if the money purchase annual allowance applied for the pre-alignment tax year.
Read more detailed guidance on carry forward rules in the Pension Tax Manual.
Pay the tax charge
Normally your members will pay the tax charge liability and account for the payment by completing a Self Assessment tax return. But your members can ask you to pay the tax charge if certain conditions are met.
If you’re subject to the tax charge you’ll need to submit an Accounting for Tax (AFT) Return and pay the tax charge by the due date.
Your members can use our calculator to work out if the pension savings they’ve made are over their available annual allowance. They’ll need to pay the tax charge liability and account for the payment by completing a Self Assessment tax return.