Our 2025 Annual Allowance event - Q&A

Tapered AA, is it still the case contributions from salary sacrifice arrangements made after 8 July 2015 are not deducted for threshold income amount?

These would be deducted from total income as the salary has been sacrificed and the employee no longer receives this. Post 9 July 2015 sacrifice arrangements for a pension contribution have to added back into the calculation for threshold income.

Remember that the total value paid by the employer counts towards the adjusted income calculation, as post sacrifice all of the pension contribution is made by the employer.

When looking at carry forward, if someone has been fully tapered for the last four years (including the current year) can you still use carry forward?

Yes. You have identified that they were tapered AA in previous years and these are what have to be factored in, even if no pension contributions have been made.

Pension salary sacrifice has to be counted in adjusted income. What about salary sacrifice for other purposes, eg childcare, EV, cycle to work? Thanks.

It has to be added back in for threshold income calculations. But this only applies for a sacrifice made for a pension contribution. The rest are not pension contributions so are fine.

How do redundancy payments affect this? I have a client that has had part of this agreed to be paid into his MP pension as employer payments over £ 60K.

The sacrifice will need to be added in for threshold income calculations. You will also need to add in the employer pension contributions for adjusted income calculations. The AA tool can do these sums for you. 

Just to check, for salary sacrifice, for the adjusted net income is the full employer contribution including the salary sacrifice. Net income excludes sacrifice

The sacrifice will not be included in total income. You will have to add the total pension contribution made by the employer post sacrifice into the employer contributions, as they are all employer contributions post sacrifice. Also bear in mind that the amount sacrificed and the employer contribution may not be the same if there is a NI saving passed on by the employer.

For the threshold income its the net income plus salary sacrifice given up.

For threshold and adjusted income calculation the sacrificed amount is taken from total income. For threshold you have to add back in the amount sacrificed to the calculation for pension contribution post 9 July 2015. Pre-existing arrangements that have not been altered before this date do not need to be added back in.

When calculating the tapered annual allowance, are Step 2 deductible payments deducted from taxable income when calculating threshold and adjusted income?

Yes, step one is basically your total income. Step 2 are the allowable reliefs.

What is the best way to get clients' salary sacrifice amounts for income calculations, given that they only confirm the full er contribution?

From their payslip, or possibly from their employer.

So if someone isn't working and puts in £3,600 gross, then gets good job in a later year, they still get carry forward up to the full AA from those years?

Yes, the unused £56,400 AA will still be available for use as normal i.e. personal contributions if they end up with more relevant earnings to support the contribution, or pension inputs from their employer..

Your calculations on what tax relief you can get are done at the end of the tax year. Individual contributions will be limited to 100% of the relevant earnings of the individual this article goes through how this works.  

Joining a pension scheme early to potentially benefit from Carry Forward later. Does the payment need to be made to that particular scheme or any/other?

No, all you need for carry forward to be available is to be a member of a pension scheme for the year you are looking to carry forward from. The payment can be to any scheme.

I missed the AA on company contributions. How is it treated and can more than 60k be contributed?

An employer contribution in excess of £60k will  be an AA excess and carry forward will be needed to mitigate the individual having an AA excess tax charge. As long as the company accountant is satisfied the whole and exclusively rules are met then the company will get corporation tax relief. This is detailed in this article.  

Is the State Pension classed as being a Pension Member for use of Carry Forward, I think not just checking!

You were right, it’s not. 

Is the increase not 4.7% from April 2026? is the 3.8% used from last year?

For the 26/27 tax year September 2025’s CPI rate will be used to uprate the starting income (or lump sum for older schemes). The 4.7% is the average earnings inflation which will likely be used for the state pension triple lock.

Sorry missed the bit about "one times cash by addition less employer contribution" bit. could you explain this please?

If a scheme has automatic tax free cash, such as older 80^th schemes then you uprate the lump sum at the start of the year by CPI, and take this away from the value of lump sum built up at the end of the year.

I highlighted saying it was times one to keep this distinct from the 16 times multiple for the income increases.

DB Inputs Formula what is the derivation of the 16 multiple?

It’s to approximate the capital value needed to purchase the DB income.

Do new public sector, career average DB schemes (e.g. Civil Service Alpha scheme) use the PIA formula you showed near the beginning?

They do indeed. It can be trickier for public sector schemes as they have scheme years that run 1 April to 31 March, this can make estimating them tricky as pension input periods are aligned to tax years.

Pls can you explain again re DB pensions (eg NHS) and threshold/adjusted calcs - do you need to separate employee cont & employer conts, or just rely on PIA?

The deemed employer contribution for DB schemes is the pension input amount for the scheme. From this you can take away the contributions the member made to the scheme. The employer payments to the DB scheme are irrelevant for this.

As an example if the DB pension input amount was £30,000 and the employer paid £10k into the scheme then the deemed employer contribution for the calculation is £20,000.

Can a spouse use TFC of £40K form their husband to fund a pension (assume paid into a joint a/c and the spouse earns £40K - no other contributions

This would not fall foul of the recycling rules as these are based on doing this for your own pension however, if the spouse then did the same for the husband then this could raise questions.

Still worth having bonus paid into pension and asking employee to bump in their NI saving?

If the net benefit to the client is there, then this would seem sensible. We have a calculator that can do the sacrifice numbers for you https://www.mandg.com/wealth/adviser-services/tech-matters/tools-and-calculators/salary-sacrifice-calculator

What calculations need to be considered when working out a personal contribution to a Personal Pension Plan for an active member of the judicial pension scheme?

The 2022 Judicial Pension scheme is not a registered pension. Normal AA rules apply to the registered Judicial pension schemes.

Maybe I missed this but is there any good reason for exceeding annual allowance?

You did! If there is demonstrable net benefit then this would be a good idea. An example would be using an AA excess to get out of the personal allowance trap. You effectively get 60% relief and will have a 40% tax charge. 

Can we please get a copy of these slides?

Pls can i have a copy of the webinar / slides etc

is it possible to get a copy of the slides?

Yes to all three. 

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