Pensions, annual allowance and carry forward from 2016
Discussion
From April 2016 my contributions to my SIPP (including all available taper, reliefs, etc) will be limited to £10,000. Fine. (Well, not fine, but understood).
If I have annual allowance remaining from this year (and the previous 2 years), can I contribute up to that amount in the 2016/2017 year and still get income tax relief? Or do the shutters come down in April and I can only get income tax relief in F2016/17 on the £10,000 maximum? That doesn't seem right- I assume carry-forward will still operate, just at the reduced rate.
My contributions were: 11/12: £40,750; 12/13: £12,000; 13/14: £15,368; 14/15: £63,236. I work that out as having £98,646 allowance remaining for 2015/16. I assume some of that will roll forward if I don't use it all before 5 April 2016.
Thanks (Eric),
Richard
If I have annual allowance remaining from this year (and the previous 2 years), can I contribute up to that amount in the 2016/2017 year and still get income tax relief? Or do the shutters come down in April and I can only get income tax relief in F2016/17 on the £10,000 maximum? That doesn't seem right- I assume carry-forward will still operate, just at the reduced rate.
My contributions were: 11/12: £40,750; 12/13: £12,000; 13/14: £15,368; 14/15: £63,236. I work that out as having £98,646 allowance remaining for 2015/16. I assume some of that will roll forward if I don't use it all before 5 April 2016.
Thanks (Eric),
Richard
Why is it now £10k...are you taking out the pot..if so look here..
https://www.gov.uk/tax-on-your-private-pension/ann...
https://www.gov.uk/tax-on-your-private-pension/ann...
CaptainSlow said:
Why is it now £10k...are you taking out the pot..if so look here..
https://www.gov.uk/tax-on-your-private-pension/ann...
No, because I'll be caught by the new taper rules on taxpayers earning £150,000 or more. Max contribution will be reduced to £10,000 pa for those hardest hit. I just want to check (but couldn't find anywhere online) that that £10,000 was (or will be) on top of any unused carried forward annual allowance. https://www.gov.uk/tax-on-your-private-pension/ann...
Thanks.
RichS said:
No, because I'll be caught by the new taper rules on taxpayers earning £150,000 or more. Max contribution will be reduced to £10,000 pa for those hardest hit. I just want to check (but couldn't find anywhere online) that that £10,000 was (or will be) on top of any unused carried forward annual allowance.
Thanks.
Don't forget, it's not just folk with an annual salary of £150,000 who have to worry about the annual allowance taper. It's tested against “adjusted income”, which includes much more than salary, and is likely to affect people earning £110,000 or above. Adjusted Income includes all taxable earnings (such as income from property, interest on savings and dividends.. even what your employer pays into your pension).Thanks.
In respect of other wrappers, take an opinion on the merits or suitability of using something like the VCT to further chip away at recovering some tax reliefs. This may not apply to you, but if anyone else is caught in the lower reaches of the Adjusted Income net, take advice too, on possibly knocking it back a little by transferring assets to a spouse.
Ginge R said:
Don't forget, it's not just folk with an annual salary of £150,000 who have to worry about the annual allowance taper. It's tested against “adjusted income”, which includes much more than salary, and is likely to affect people earning £110,000 or above. Adjusted Income includes all taxable earnings (such as income from property, interest on savings and dividends.. even what your employer pays into your pension).
In respect of other wrappers, take an opinion on the merits or suitability of using something like the VCT to further chip away at recovering some tax reliefs. This may not apply to you, but if anyone else is caught in the lower reaches of the Adjusted Income net, take advice too, on possibly knocking it back a little by transferring assets to a spouse.
Yes fair point- thanks. In respect of other wrappers, take an opinion on the merits or suitability of using something like the VCT to further chip away at recovering some tax reliefs. This may not apply to you, but if anyone else is caught in the lower reaches of the Adjusted Income net, take advice too, on possibly knocking it back a little by transferring assets to a spouse.
I am also looking at EIS schemes to take advantage of the 30% income tax refund. Not that that will have a bearing on my income for the purposes of pensions, but it does cut down the overall tax bill.
Cool. Not a suggestion, but given that you're already in that space, you'll also be aware of SEIS.
https://www.gov.uk/guidance/seed-enterprise-invest...
On your suggested levels of income, there may also be estate planning benefits to EIS/SEIS as well, which are generally 100% exempt from IHT after they have been held for 2 years. Tax and IHT relief are never solely good reasons to invest in any wrapper in isolation, but those two points are undeniably relevant factors for many which should be taken into account.
https://www.gov.uk/guidance/seed-enterprise-invest...
On your suggested levels of income, there may also be estate planning benefits to EIS/SEIS as well, which are generally 100% exempt from IHT after they have been held for 2 years. Tax and IHT relief are never solely good reasons to invest in any wrapper in isolation, but those two points are undeniably relevant factors for many which should be taken into account.
Ginge R said:
Cool. Not a suggestion, but given that you're already in that space, you'll also be aware of SEIS.
https://www.gov.uk/guidance/seed-enterprise-invest...
On your suggested levels of income, there may also be estate planning benefits to EIS/SEIS as well, which are generally 100% exempt from IHT after they have been held for 2 years. Tax and IHT relief are never solely good reasons to invest in any wrapper in isolation, but those two points are undeniably relevant factors for many which should be taken into account.
Thank you. Yes, agreed, I thought about SEIS too. Though on the basis that some things are too good to be true (50% tax rebate being one of them), I thought I might stick with EIS as slightly more safe in terms of risk/reward (all other things being equal). That said, there seem to be quite a lot of chancers out there flogging EIS schemes who don't fill me with confidence. A lot of them seem to be suggesting that the return will be founded on nothing much more than the tax refund. I'm sure that's not true of all of them, Octopus being one example of a provider you can probably trust. https://www.gov.uk/guidance/seed-enterprise-invest...
On your suggested levels of income, there may also be estate planning benefits to EIS/SEIS as well, which are generally 100% exempt from IHT after they have been held for 2 years. Tax and IHT relief are never solely good reasons to invest in any wrapper in isolation, but those two points are undeniably relevant factors for many which should be taken into account.
But yes, to your point, I am trying to find a home for my money as tax-efficiently as possible. BTL is another (not mutually exclusive) option though prices are high here in the South-East and yields commensurately low. And that's before all the grief coming down the line for BTL investors.
Essentily I don't see the need/point to pay down the mortgage just now given the rate is so low compared to what even a moderately safe investment would return. We don't need our cash for a few years. I want to max out the pension when I can. And any additional tax refund on top through EIS/SEIS is a bonus. Stuff like crowd funding is an accident waiting to happen I think.
Not sure if any of that assisted/contributed to the debate....
Get the basics right, identify your objectives and reverse engineer. Understand the distinction between risk tolerance, capacity and inclination, and what (in real terms) EIS and/or SEIS will give you. I agree completely in respect of your posts about returns. Property, bonds and the markets are going to be down for a while yet. Even more noteworthy; downward pressures will really start to kick in as the state seeks to deflate debt and deficit via financial repression.
We live in interesting (and in terms of financial planning), fascinating times. The only thing I would say, generally, is that anyone who has started to invest in the past ten years or so will be familiar with the cyclical patterns we are seeing. If anyone is not convinced about starting the course for at least one economic cycle, or close to it, then don't start. I'm about to respond to Simpo's thread elsewhere here and have touched on it for him in my early morning diary blog.
Lucky Simpo..
We live in interesting (and in terms of financial planning), fascinating times. The only thing I would say, generally, is that anyone who has started to invest in the past ten years or so will be familiar with the cyclical patterns we are seeing. If anyone is not convinced about starting the course for at least one economic cycle, or close to it, then don't start. I'm about to respond to Simpo's thread elsewhere here and have touched on it for him in my early morning diary blog.
Lucky Simpo..
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