Rosie and Sam Pension Contribution – BPP Learning Media

Hi.

I am a little stuck on the following question.

Rosie is the managing director of Hornburg plc. During the tax year 2019/20 Rosie was paid gross directors’ remuneration of 220,000 pounds and she had received dividend income of 500,000 pounds. She had the same income in 2016/17, 2017/18 and 2018/19. She has made the following personal pension contributions:

Tax Year Pension Contribution

16/17 Nil
17/18 6,000 pounds
18/19 Nil

Rosie was a member of a pension scheme for the tax year 2018/19 but not in the tax year 2016/17.

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The answer is

Rosie was a member of a pension scheme for 2018/19, so the annual allowance for that year is available but the annual allowance is not available for carry forward for 2016/17. Her adjusted income for the tax years 2017/18, 2018/19 and 2019/20 is greater than 210,000 pounds for each year, so her annual allowance for all three tax years are tapered to 10,000 pounds.

She has unused allowances of (10,000-6,000) = 4,000 pounds from 2017/18, and 10,000 pounds from 2018/19, so the available annual allowances for 2019/20 are therefore (10,000 (2019/20) + 4,000 +10,000) = 24,000 pounds

Now with this question I understand with the taxable income being 220,000 pounds, that the annual allowance is reduced to 10,000 pounds. And the rule to carry forward three years unused annual allowance is that it is only possible if the taxpayer is registered with a scheme.

However in this question it says that Rosie was a member of a pension scheme for the tax year in 2018/19 but not 2016/17. This must also mean that she was not a member of a pension scheme in 2017/18. Then why have they included the unused allowance from 2017/18 (4,000 pounds)?