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Your unused Annual Allowance

Find out how your unused Annual Allowance can help you manage your tax libaility

What is your unused Annual Allowance?

This is any Annual Allowance (AA) you have left over from the previous three tax years. It’s known as carry forward.

If your pension savings have gone over the AA for the current tax year, you can carry forward any unused AA from the last three tax years (starting from the earliest of the three years first) to reduce the amount you’re over by.

You’ll only have to pay tax if you’re still over the AA (currently £60,000) after you’ve used all of your carry forward. You will need to apply the AA limit that was applicable in each of the relevant tax years to calculate your available carry forward. For the 2020/2021, 2021/2022 and 2022/2023 tax years, the AA limit was £40,000.

When can you carry forward unused AA?

You can do this as long as during the tax year:

  • you’ve built up benefits in a registered pension scheme in the UK like USS
  • you or your employer were able to get tax relief on pension savings with an overseas pension scheme.

Keep track of what you’ve used

You need to keep track of any unused AA – and allow for any years when the Tapered Annual Allowance and/or Money Purchase Annual Allowance (MPAA) may have applied. You can see what AA you have used with your USS benefits by viewing your Annual Member Statements in My USS.

If the unused AA you carry forward covers the amount you’re over by, you won’t need to complete a self-assessment tax return for AA purposes – but you may still need to complete one for other reasons. Keep a detailed record of your carry forward in case HMRC ask for more information in the future.

Need a hand?

Sign up for a free Focus on Pension Tax webinar to learn more about pension tax, including USS specific tax mitigation options.

If you want to seek guidance or take financial advice on the options available to you, visit the guidance and financial advice page. You’ll find a range of resources to support your planning and you can also find information on how to access an independent financial adviser.

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