Pension contributions- HMRC withdraw inaccurate calculator
Pension contributions- HMRC withdraw inaccurate calculator
Mon 23 Apr 2018
At the date of writing this blog, HMRC’s online pension annual allowance calculator has been withdrawn following widespread, critical press coverage drawing attention to its inaccuracy.
The calculator incorrectly excluded unused allowances of up to £40,000 from 2015/16 from the total of cumulative unused allowances that can be used to increase a contribution made in the 2018/19 tax year.
Information on the annual allowance carry forward amount can be found in HMRC’s pensions tax manual at PTM55100. That guidance comments:
For annual allowance purposes only, tax year 2015-16 is split into two ‘mini’ tax years:
- the pre-alignment tax year (6 April 2015 to 8 July 2015), and
- the post-alignment tax year (9 July 2015 to 5 April 2016)……l.
For tax year 2018-19 [Individuals can carry forward any annual allowance that they have not used in the previous four tax years to the current tax year, as follows] – from 2017-18, 2016-17, the post-alignment tax year, the pre-alignment tax year…..
The annual allowance for the current tax year is used first.
The unused annual allowance from the previous four tax years is then used, beginning with available unused annual allowance from the earliest tax year first (i.e. any available unused annual allowance from the pre-alignment tax year does not take precedence over the other previous tax years.)
PTM057100 comments that as a result of FA 2004 s228ZA:
From 6 April 2016, individuals with income for a tax year above £150,000 have their annual allowance for that tax year reduced on a tapered basis (a ‘reduced annual allowance’).
The annual allowance is reduced by £1 for every £2 of income above £150,000, subject to a minimum reduced annual allowance of £10,000.
Where the reduction would otherwise take an individual’s tapered annual allowance below £10,000 for the tax year, their reduced annual allowance for that year is set at £10,000.
This is one of the most common areas where the Mazars financial planning team see the rules being misinterpreted. If you have questions concerning pension contributions and the annual allowance amount, please get in touch with a member of the Mazars financial planning team.
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