Pension Carry Forwards announced by HMRC

The HMRC rules have been updated for the latest tax year for pension schemes, because 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). Since the 6th of April 2016, the pension input period has aligned with the tax year.

Carry forward unused annual allowance

Your members may be able increase their annual allowance by carrying forward any unused annual allowance from previous years and below are the last two tax years:

Current Tax Year – 2022/23

Tax Years members can carry forward the annual allowance – 2021/22,2020/21 and 2019/20

Tax Year – 2021/22

Tax Years members can carry forward the annual allowance – 2020/21, 2019/20 and 2018/19

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.

The AFT return: Send pension scheme reports - GOV.UK (www.gov.uk)

Calculator: Check if you have an annual allowance tax charge on your pension savings - Check if you have an annual allowance tax charge on your pension savings - GOV.UK