Change to the pension Carry Forward rules

HMRC has changed its interpretation of how the carry forward rules apply to tax years before 2011/12. Some of you have more unused annual allowance available from before 2011 than was previously thought. Payments above £50k for tax years 2009/10 or 2010/11 will no longer be treated as reducing unused annual allowance carried forward from earlier years. The excess will simply be set to £0, meaning that there is nothing to carry forward from that year.

Please note that there is no change to the way excess provision in 'intervening years' after 2010/11 is treated. This will still affect unused annual allowances from earlier years. If you are already in your 2012/13 pension year, it isn't too late to start a new pension arrangement now to sweep-up unused allowance for 2008/09 that may have previously appeared unavailable under the old interpretation.

Example
The effect of change is possibly best illustrated by an example:

Old HMRC interpretation
Input year Input amount Unused allowance to carry forward Cumulative carry forward available
2008/09 £0 £50,000 £50,000
2009/10 £0 £50,000 £100,000
2010/11 £150,000 (£100,000) £0

New HMRC interpretation
Input year Input amount Unused allowance to carry forward Cumulative carry forward available
2008/09 £0 £50,000 £50,000
2009/10 £0 £50,000 £100,000
2010/11 £150,000 £0 £100,000

This is generic information and it is important to seek individual independent financial advice with regards to this information to ascertain your specific position.

Citimark are here to help, 01275 462469 or mail@citimark.co.uk.