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HMRC have created new guidance on how the carry forward for the deemed annual allowance works from 2008/09 onward.

Following the reduction in the pensions annual allowance there are transitional carry forward rules which bring a deemed allowance into account from 2008/09.

For example:

Maya contributes £100,000 to her pension scheme in 2011/12 she has made contributions in the previous three years as follows: 

Year

Contribution
£

Deemed annual  allowance

Unused/(excess)

Unused allowance c/fwd

2008/09

40,000

50,000

10,000

10,000

2009/10

60,000

50,000

-

10,000

2010/11

30,000

50,000

20,000

30,000

So in 2011/12, Maya may deduct from her £100,000 contribution the actual allowance available for the year of £50,000 together with her deemed allowances brought forward of £30,000. She will have an excess contributions charge due on the balance of £20,000.

Note that the fact that the contribution exceeded the available deemed allowance in 2009/10 does not affect the carry forward of the deemed allowance.

All change: different rules apply from 2011/12: 

Where a pension contribution exceeds the £50,000 annual allowances the excess will be deducted first from any unused allowance brought forward, any balance will then be subject to the excess contributions charge. 

Year

Contribution £

Annual allowance

Unused/(excess)

C/fwd

2010/11

40,000

50,000

10,000

10,000

2011/12

60,000

50,000

(10,000)

-

2012/13

30,000

50,000

20,000

20,000

2013/14

100,000

50,000

(50,000)

-

Maya would have an excess contributions charge in 2013/14 of £30,000 (£100,000 - £50,000 – 20,000). 

For illustrations of this and the pensions input calculations see Pensions: tax rules and planning