6th April 2011
Contributions to Registered UK Pensions
From 6 April 2011 the annual allowance that individuals
will be able to contribute into their registered UK pensions
will decrease from the current level of £255,000 to
£50,000. Individuals will receive tax relief on their
contributions at their marginal rate of tax.
There is also the introduction of a carry
back/carry forward (whichever term you wish to use)
mechanism where it is possible for an individual to carry
forward any unused annual allowance from the previous
three tax years to the current tax year. The rules have
been drafted such that in these previous tax years, the
amount of annual allowance is assumed to be
£50,000.
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An individual must exhaust their annual allowance from the current tax year before they can start to use any unused allowance from previous tax years
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When using unused allowances from previous tax years the earliest tax year must be exhausted first
Example – an individual wishes to make a
gross contribution of £100,000 in the 2011/12 tax
year and they had previously made gross contributions of
£30,000 in each of the 2008/09, 2009/10 and 2010/11 tax
years
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The individual would use all of their £50,000 allowance in 2011/12 tax year
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The £20,000 unused allowance from 2008/09 would then be utilized
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Followed by the £20,000 unused allowance from 2009/10
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Followed by £10,000 unused allowance from 2010/11