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annual allowance query

Discussion in 'Retirement' started by Bedlam3, Mar 29, 2019.

  1. Bedlam3

    Bedlam3 Lead commenter

    If was wondering if someone might be able to help me with a query please?
    I might be in a position to pay a lump sum into either the teachers pension or my AVCs with the Pru.
    I know I can carry over unused annual allowances from the previous 3 tax years. However I am a bit confused by this from the citizens advice website... "You can't receive tax relief on contributions in excess of your earnings in a tax year"
    So would this mean that if I had, say, £30,000 unused allowance from the three previous tax years but I don't earn anything in this tax year would it mean I cannot claim any tax relief at all even though I have unused annual allowance?
    The situation is that I may, or may not, receive a small settlement from my school but if I do it won't be until next tax year and I will not have any earnings in 2019-20 so I am unsure if I can pay the settlement as a lump sum into one of my pensions.
    I hope I have made sense!
  2. diddydave

    diddydave Occasional commenter

    As always I would say get proper advice from an expert as they can look at your exact circumstances...I am no expert but my reading of this is exactly the same as Citizens Advice have told you. There is some confusion between the different 'allowances'. Pension, tax, personal...

    Your pension allowance is £40,000 a year but you only get tax-relief on the year that you pay into it. Using a previous years pension allowance does not get the tax back from that year. But, if you are earning way more than £40,000 this year you do get tax-relief on it this year. (*this year being the tax year that you pay it into the pension)

    So you can put in more than £40,000 if you have not used it all up in the previous 3-years (unlikely)

    You only get tax-relief on up to 100% of your earnings in the year you pay into the scheme (so not long left for this year!) - bear in mind that your tax relief will be your annual salary minus the tax allowance (£11,850) as that amount is not taxed anyway. You gain no tax benefit by putting the final £11,850 of your earnings in as it was tax-free anyway.

    Don't forget that the payments into your teacher's pension will also be using up part of the £40,000 allowance.

    If you have no earnings at all then I think the maximum you can put into a personal pension will be £2880 (or similar) and the government do actually top it up by 20%. If you are no longer earning you will not be able to put it into the Pru's AVCs as that scheme is only for serving teachers.
  3. Bedlam3

    Bedlam3 Lead commenter

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