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HMRC internal manual

Pensions Tax Manual

From
HM Revenue & Customs
Updated
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Annual allowance: tax charge: telling HMRC

Glossary PTM000001
   

 

Telling HMRC about the annual allowance charge
What an individual needs to do if they have an annual allowance charge
What to do if an individual won’t know their pension input details until after the Self Assessment filing date. How to complete the tax return
Where individuals can get information from to complete their tax return
How to estimate what the pension input amount is
If the member claims relief for their pension contributions on their tax return, should they still do this?

Telling HMRC about the annual allowance charge

An individual does not need to tell HMRC about their pension savings (total pension input amount) for a tax year if they are:

  • below the annual allowance for the tax year, or
  • above the annual allowance but they have unused annual allowance from the previous three tax years that can be carried forward to the current tax year and this means that no annual allowance charge is due for the tax year.

Individuals who are subject to the money purchase annual allowance for tax year 2015-16, or later tax years, might still be liable to an annual allowance charge that must be included in their Self Assessment tax return despite their total pension input amount not exceeding their available annual allowance. This would be the case where the only amount subject to the annual allowance charge is a ‘money-purchase’ input in excess of the £10,000 money purchase annual allowance.

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What an individual needs to do if they have an annual allowance charge

An individual will need to tell HMRC if they are liable to an annual allowance charge.

If a person liable to an annual allowance tax charge normally completes a Self Assessment tax return, then they tell HMRC about their pension savings and liability to the annual allowance charge as part of the return. They will need to complete the Additional Information pages of the tax return to show the amount by which their total pension input amount exceeds the annual allowance. The boxes that need to be completed for the annual allowance are in the ‘Pensions savings tax charges’ section (on the additional information pages (SA101) in the paper return).

People using paper returns will need to ask for the additional information pages (SA101) to report the information.

Further information to help complete this part of the tax return can be found on a helpsheet - HS345 ‘Pension savings - tax charges on any excess over the Lifetime Allowance, Annual Allowance and on unauthorised payments’ .

If the person liable to an annual allowance charge hasn’t completed a tax return before (or it’s been some time since they did), they will need to complete a registration form to let HMRC know what’s changed and to get a tax return.

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What to do if an individual won’t know their pension input details until after the Self Assessment filing date. How to complete the tax return

The tax return should be completed as normal, completing the boxes in the ‘Pension savings tax charges’ section on the additional information pages (SA101) in the paper tax return. If a member cannot get accurate information from their scheme, they should use an estimate of their pension input amount for the year to work out if their total pension input amount is more than the annual allowance. If it is, they should put this excess figure in the appropriate box. They should then make a note in the ‘Any other information’ part of the tax return to explain that they have used an estimated figure when calculating the amount in excess of the annual allowance and when they expect the final figure to be available. They will also need to tick the box to show that they have used estimated figures on their tax return.

Once a member gets the details that they need to work out their annual allowance charge accurately, they can amend their tax return if this is within 12 months of the statutory filing date (more information about the deadlines for submitting an amended return can be found in the Self-Assessment Manual at SAM124165 (external users please refer to http://www.hmrc.gov.uk/manuals/sammanual/SAM124165.htm). Where the estimate is less than the final figure, the individual will need to pay any additional tax due along with any interest on the late payment of the tax.

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Where individuals can get information from to complete their tax return

Their pension scheme might automatically send the individual a statement to help them to work out if they will be liable for an annual allowance charge - see PTM167000 for more details of when this happens.

If an individual has savings in more than one pension scheme and they think that the total of their pension savings across all of these is above the annual allowance or, if applicable, the money purchase annual allowance (and they do not expect to receive a statement automatically from each scheme), they can ask each of their scheme administrators to send them the information they require so that they can work out whether their pension saving might have exceeded the annual allowance (or money purchase annual allowance). PTM167000 gives more information on requesting information from the scheme administrator.

An individual can also ask for a pension input statement for the previous three tax years if they think they might need to use the carry forward facility (see PTM055100).

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How to estimate what the pension input amount is

For an other money purchase arrangement the pension scheme should send the member a ‘disclosure’ statement each year to show contributions that have been added to their pension pot. If the pension savings statement has not yet been received, the member can use the disclosure statement but will need to check carefully which pension input period applies and pick out the right contributions for the pension input period.

For a defined benefits arrangement the scheme may send an annual statement that gives an estimate of what the member’s benefits will be but members should be careful to check that the statement is an appropriate starting point for the estimated pension input amount calculation. If the scheme does not have this then member’s will be able to estimate their pension input amount by using the figures for their pensionable salary at the beginning and end of the pension input period, the scheme accrual rate and the number of years that they have been a scheme member. If a member does not know what their pension input period is or what their scheme accrual rate is then they should contact their pension scheme administrator.

Guidance on valuing pension input amounts starts at PTM053000.

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If the member claims relief for their pension contributions on their tax return, should they still do this?

Yes, they should still claim any tax relief on their pension contributions using their tax return.

Any annual allowance charge will offset some or all of this relief.