AA & carry forward - use it or lose it

Published by Nilesh Shah on

Estimated reading time: 2 minutes

If you believe you have any unused Annual Allowance (AA) from 2015/16 you may wish to use it and not lose it. 

Any unused AA of up to £40,000 from 2015/16 can be utilised in the current (tapered) 2018/19 tax year but NOT beyond (as this cannot be carried forward beyond 5 April 2019). Please note that the current tax year’s (tapered) AA must be used before utilising the unused AA from 2015/16.

Set out below is how much AA can be carried forward each year from 2015/16:

Tax year        Annual Allowance (AA)

Carry forward

09/07/2015 to 05/04/2016* up to £40,000                       up to £40,000 less pension input amount for 09/07/2015 to 05/04/2016
2016/17 £10,000 to £40,000 Individual (tapered) AA less pension input amount for 2016/17
2017/18                                   £10,000 to £40,000                    Individual (tapered) AA less pension input amount for 2017/18

*Special rules apply for the 2015/16 tax year

From 2016/17 the AA is tapered for individuals with taxable earnings in excess of £150.000. If taxable income from all sources is £110,000 and is above £110,000, it is necessary to calculate the adjusted income for the tax year – broadly, this is all taxable income plus the value of pension savings (but less the amount of contributions in a DB arrangement).

If adjusted income exceeds £150,000, there is a £1 tapered reduction in the AA for every £2 of adjusted income above £150,000. The maximum reduction to the AA is £30,000, so that those with an adjusted income of £210,000 or above have an AA of £10,000.

For example (tapered AA):

Adjusted income Annual Allowance from 6 April 2016
Less than £150,000 £40,000
£160,000 £35,000
£170,000 £30,000
£180,000 £25,000
£190,000 £20,000
£200,000 £15,000
More than £210,000 £10,000

Please note: Tapered AA will be required to be calculated for each tax year.

 With tax relief on your contributions currently awarded at your marginal rate of tax, you should consider making the most of the carry-forward rule utilising any unused AA from 2015/16 in the current 2018/19 tax year.

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