Given that the average salary is around £33,000 gross, I am not convinced that "the vast majority" could use the £40,000 annual pension contribution allowance as stated! Very well explained. Since you recorded that, the annusl allowance has risen to £60,000, so for the very high earners, this has become even more yseful to save for later life and to save tax.
Many thanks Simon, that was very clear. The only bit I was confused about was at the end when you said he now earns a good whack and fancies making a bigger contribution. My understanding is that the maximum you can put into a pension in year is that year's salary. So if his good whack was £60,000 and he has already put in £25,000 he can only add another £35,000 from his £90,000 carry over, and if he earned £80,000 he could only add another £55,000, i.e. you can only add your salary minus your contribution to date from your total carry over. Please could you let me know if I misunderstanding something?
Hi David yes that’s correct you have to have enough ‘relevant earnings’ to frank the contribution in the first place. Such relevant earnings include salary but don’t include divy
Can one pay up to the annual gross salary (for current year) which includes the carry forward from three previous years? Presumably, you can’t exceed your current gross salary?
If in the same year you max out your annual pension allowance of 40k for example, but you had 60k carried over from previous years 3 years, and your salary is 60k, I understand that you can make contribution of another 20k due to carryover/allowance rule, but does that mean that the person then loses the rest of the carry over at that point?, i.e. 40k,or does that 40k carry over to the next tax year, where providing you max your annual pension allowance of 40k again you could then pay another 20k, leaving you with a remaining 20k carry over to use in year after.
It’s on a ‘FIFO’ basis, so the first of those 3 year carried forward years would ‘drop out’ and then you’d test against whatever is left, this time substituting in the most recent year into the calcs
Given that the average salary is around £33,000 gross, I am not convinced that "the vast majority" could use the £40,000 annual pension contribution allowance as stated!
Very well explained.
Since you recorded that, the annusl allowance has risen to £60,000, so for the very high earners, this has become even more yseful to save for later life and to save tax.
Absolutely brilliant. Thanks Simon
Thanks
Many thanks Simon, that was very clear. The only bit I was confused about was at the end when you said he now earns a good whack and fancies making a bigger contribution. My understanding is that the maximum you can put into a pension in year is that year's salary. So if his good whack was £60,000 and he has already put in £25,000 he can only add another £35,000 from his £90,000 carry over, and if he earned £80,000 he could only add another £55,000, i.e. you can only add your salary minus your contribution to date from your total carry over. Please could you let me know if I misunderstanding something?
Hi David yes that’s correct you have to have enough ‘relevant earnings’ to frank the contribution in the first place. Such relevant earnings include salary but don’t include divy
@@simongray2484 Many thanks, I totally understand now.
Can one pay up to the annual gross salary (for current year) which includes the carry forward from three previous years? Presumably, you can’t exceed your current gross salary?
Have you made a video on Corporation Tax losses and how to use them?
If in the same year you max out your annual pension allowance of 40k for example, but you had 60k carried over from previous years 3 years, and your salary is 60k,
I understand that you can make contribution of another 20k due to carryover/allowance rule, but does that mean that the person then loses the rest of the carry over at that point?, i.e. 40k,or does that
40k carry over to the next tax year, where providing you max your annual pension allowance of 40k again you could then pay another 20k, leaving you with a remaining 20k carry over to use in year after.
It’s on a ‘FIFO’ basis, so the first of those 3 year carried forward years would ‘drop out’ and then you’d test against whatever is left, this time substituting in the most recent year into the calcs
Good info my friend!
if in one of those previous 3 years he earned on £30k. would this affect the total. or is the £40k limit based on the current year ?
Need to do a capacity check each year, so if salary was £30k then £30k is the max even though £40k is the limit and £30k would be carried forward
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