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- December 14, 2015 at 9:49 pm #291808
Hello Sir
Please find below the example 1 from Pensions chapter
I wish to ask you a query in this.Aston made the following gross amount of contributions into his pension scheme:
2011/12 £62,000
2012/13 £30,000
2013/14 £25,000
Aston has an annual salary of £120,000.
Compute the total pension input allowed for Aston for the 2014/15 tax yearAnswer to Example 1
The total pension input allowed is made up as follows:
AA for 2014/15 40,000
Unused AA b/f
– 2011/12 fully used nil
– 2012/13 (50,000 – 30,000) 20,000
– 2013/14 (50,000 – 25,000) 25,000
Maximum gross contribution 85,000Answer:
It can be seen from the above working that the current year’s AA is used first and then unused AA brought forward is used on a FIFO basis.If therefore in 2014/15 Aston made a gross contribution of £55,000, this would be less than his relevant earnings for the year (£120,000)
and would therefore qualify for relief and would utilise all of the 2014/15 AA of £40,000 and £15,000 of the £20,000 unused AA brought
forward from 2012/13.
The remaining £5,000 would be carried forward for one more year to 2015/16. If a £30,000 payment were then made this would be within
the AA for 2015/16 so no unused AA brought forward would be utilised.
The £5,000 unused AA from 2012/13 would now lapse so that in 2016/17 after that year’s AA is used there would be unused AA brought
forward for use as follows:
– 2013/14 £25,000
– 2014/15 £NIL
– 2015/16 (40,000 – 30,000) £10,000Query:
I understood only the max contribution of 85000Please help me understand why even if there is a gross contribution of 55000 after considering the cap of 40000 for the year we are also considering 15000 more from 12/13 year.
And if so we are considering the contribution of 12/13, why we didnt consider the whole of 20000 and also the whole of 25000 of 13/14 because we can go upto the relevant earnings of 120000 ?
Its a kind confusing
Please can u give a clear idea of how it works.December 15, 2015 at 11:02 am #291843With respect I do not think you have correctly understood the example. The example states that there is a gross contribution in 2014/15 of 55,000 – this is clearly before considering the AA of 40,000 for the 2014/15 tax year! The gross contribution is NOT as you say above “AFTER considering the cap of 40,000”!!
Hope this clarifies situation.December 16, 2015 at 7:31 pm #292024Thank You so much Sir.
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