Question

Maya Alshehhi has taxable earnings of £125,000 in 2018/19. Maya has made following contributions to her personal pension plan in the previous tax years:

2015/16 £15,000

2016/17 £17,000

2017/18 £16,000

Required:

Compute the maximum gross tax relievable pension contribution that Maya can make in 2018/19 taking into account brought forward annual allowance.

Answer 1

The maximum gross tax relievable pension contribution that Maya can make in 2018/19 is 40,000or 100 % taxable earning whichever is less. In this case Maya taxable income (125,000) is greater than 40000, hence maximum gross tax relievable pension contribution is restricted to 40,000.

Maya has carry forward annual allowance in her account . Carry forward allows to make use of any annual allowance that may have not been used during the three previous years,however the amount is limited to 40,000.

Thus the broght forward allowance of 15,000 , 17,000 and 16,000 exceed 40,000 ,the maximum gross tax relievable pension contribution that Maya can make in 2018/19 is 40,000 out of the carry forward annual allowance in her account.