Beta This part of GOV.UK is being rebuilt – find out what this means

HMRC internal manual

Pensions Tax Manual

From
HM Revenue & Customs
Updated
, see all updates

Annual allowance: transitional rules for tax year 2015-16: pension input amounts: other money purchase arrangements

Section 233 Finance Act 2004

Transitional annual allowance rules apply for tax year 2015-16.

For annual allowance purposes only, the 2015-16 tax year is split into two ‘mini’ tax years - the ‘pre-alignment tax year’ and the ‘post-alignment tax year’ (see PTM058010 for more details).

Any pension input amounts for the pre-alignment tax year are tested against the allowances (annual and, if applicable, money purchase annual allowances) for that ‘mini’ tax year.  Similarly, any input amounts for the post-alignment tax year are tested against the allowances for that ‘mini’ tax year. See PTM058020 and PTM058030 for more details.

For other money purchase arrangements, the pension input amount for each ‘mini’ tax year will be the total of all relievable member contributions plus all employer contributions paid in respect of the individual in a pension input period ending in the ‘mini’ tax year.

The method of calculation is the same as set out in PTM053200 generally, except for the change to the ‘mini’ tax years for tax year 2015-16.  Also, see PTM058090 for details about the application of the money purchase annual allowance.

Example

Sandip’s only arrangement is an other money purchase arrangement. Sandip and his employer contribute to the arrangement.

The money purchase annual allowance does not apply at all as Sandip has not flexibly accessed a money purchase arrangement.

A pension input period for the arrangement started on 1 June 2014 and ended on 31 May 2015. The total of Sandip’s and his employer’s contributions during this period is £24,000.

The next pension input period started on 1 June 2015 and was ended on 8 July 2015 (but for the transitional rules it would have ended on 31 May 2016).  The total of Sandip’s and his employer’s contributions during this period is £4,100.

This means that Sandip’s total pension input amount for the pre-alignment tax year (6 April 2015 to 8 July 2015) is the aggregate of the pension input amounts for the pension input periods 1 June 2014 to 31 May 2015 and 1 June 2015 to 8 July 2015 = £28,100 (£24,000 + £4,100).

Sandip’s chargeable amount for the pre-alignment tax year is nil because his total pension input amount (£28,100) is less than the annual allowance of £80,000 for that ‘mini’ tax year.

Sandip can carry forward to the post-alignment tax year £40,000 of unused annual allowance from the pre-alignment tax year.  Even though £51,900 worth of the £80,000 annual allowance for the pre-alignment tax year was not used by Sandip, the maximum annual allowance he can carry forward is £40,000.

The next pension input period for Sandip’s arrangement started on 9 July 2015 and ends on 5 April 2016.  The total of Sandip’s and his employer’s contributions during this period is £18,450.

This means that Sandip’s total pension input amount for the post-alignment tax year (9 July 2015 to 5 April 2016) is the pension input amount for the pension input period 9 July 2015 to 5 April 2016 = £18,450.

Sandip’s chargeable amount for the post-alignment tax year is also nil because his total pension input amount (£18,450) is less than the amount of unused annual allowance of £40,000 that he carried forward from the pre-alignment tax year to the post-alignment tax year.

(Note – any available unused annual allowance Sandip might be able to carry forward from 2012-13, 2013-14, 2014-15 to the post-alignment tax year is not material in this particular example as the available unused annual allowance from the pre-alignment tax year - £40,000 in this example – is used in priority to any other available unused annual allowance from earlier tax years.)

For the tax year 2015-16 overall, Sandip does not have an annual allowance charge because the sum total of his chargeable amounts for the pre and post-alignment tax years is nil.