If people do not use their annual pension allowance before the Budget, they could lose it, say leading audit, tax and business advisory firm, Blick Rothenberg.
Chris Boulet, a Partner at the firm, said: “To fill the financial ‘black hole’ the Chancellor is going to make ‘difficult decisions’ in the upcoming Budget, one area she may look at is pension payments and the three year carry forward relief.”
He added: “Pension payment tax relief allows any unused annual pension allowances from the previous three tax years can be carried forward. This means you can still get unclaimed tax relief if you had a pension plan in the previous three years and you did not pay up to your annual pension allowance.”
Chris said: “However, to save the Government money the carry forward relief could be reduced to one year carry forward or removed entirely, similar to ISA allowances.”
He added: “The carry forward relief is very helpful if you have fluctuating income or cashflow, which can be an issue for lower earners due to the cost-of-living crisis. It is also useful for higher earners if they wish to maximise their income tax relief in years when they have greater earnings and higher associated rates of tax.”
Chris said: “Given that the Chancellor may remove or reduce pension payment tax relief in the Budget, anyone who has not maximised their contributions should consider doing so if they are eligible. Getting tax relief now could take the sting away from other painful pension changes Reeves may be planning.”
He added: “However, to carry pension payment tax relief forward, there are conditions that need to be met. These include:
- You must be an active member of a UK-registered pension scheme in the year which you are claiming carry forward relief
- You must use all of your current year allowance before accessing any previous years carry forward relief
- You need sufficient relevant earnings to absorb your total gross pension payments.”
