How to use the annual pension allowance and contribution details wizard from 2023/24

When should I use the annual pension allowance wizard?

If your total pension contributions are close to exceeding your annual pension allowance and/or your pension allowance is likely to be tapered, you can use the wizard to:

• Calculate excess contributions and possible pension tax charge
• Keep track of the previous 3 years' contributions and any brought forward allowances

The wizard is designed for defined contribution schemes which have not been flexibly accessed, but can also be worked around to use with defined benefit schemes. If schemes have been flexibly accessed, excess contributions, using the alternative annual allowance should be calculated manually and entered into 'Total contributions for the 2023/24 tax year in  excess of the annual allowance' (box AIL10 ). HMRC guidance explains more about when the annual allowance is reduced.

Where can I find the annual pension allowance wizard?

In SimpleStep:

Tax reliefs and allowances > Pension contributions and annual allowance

In the section Annual pension allowance, click on the wand next to ‘Total contributions for the 2023/24 tax year that are in excess of the personal allowance’.

OR

In HMRC Forms:

Additional information > Page 4

Click on the wand next to Box 10 ‘Amount saved towards your pension, in the period covered by this tax return, in excess of the Annual allowance’.

Overview of each section

Pension contributions for the 2023-24 tax year:  Use this section to record the current year contributions and to work out the excess contributions before any brought forward allowances can be used.

Unused allowances brought forward: Use this section to record and keep a track of brought forward allowances that can be used against the current year’s excess contributions.

2023-24 annual allowance summary: Displays the total contributions from section 1, brought forward allowances that can be used from section 2 and the excess contributions that will be subject to the pension savings tax charge.

Entries in more detail

Pension contributions for the 2023-24 tax year:

Pension contributions paid net with relief at source*: Enter pension contributions paid into a private pension scheme out of your own net income and not usually contributions paid into a workplace scheme**. These contributions will provide additional tax relief (by extending the basic rate band) for a higher rate taxpayer. 

*Relief at source for private pension schemes is where contributions are paid into it net of tax and are 'grossed up' by the pension provider, in conjunction with HMRC. This is the way in which most private pension schemes get the basic rate tax relief for the individual.

** Most workplace schemes operate by deducting employee contributions from gross pay before income is then taxed. But some schemes (such as the NEST government scheme) deduct contributions from the employees net pay. Essentially this means they should be treated in the same way as private pension contributions and therefore entered here.

Pension contributions paid gross without relief at source: These will be contributions paid by you to a pension scheme that does not operate relief at source. For example you may pay additional contributions into an occupational scheme ( this is usual for NHS workers who are both employed and self employed). You will receive basic and potentially higher rate relief for these contributions on the tax return (shown as 'income tax relief' below the personal allowance on the SA302 tax summary).

The next sections are used to record pension contributions made by someone else on your behalf (not you employer) , employer contributions and workplace contributions which would not be entered on the tax return itself (because tax relief does not have to be claimed). However, as part of this wizard they should be entered in order to calculate the total contributions that are in excess of the annual allowance.

Contributions made by someone else on your behalf:  A third party pension contribution is a contribution made on behalf of an individual by a party other than the member or their employer (or former employer). This could be another individual (such as parent or grandparent) , a company or other legal entity - for example, a trust.

• With relief at source: contributions to a pension scheme whereby contributions are paid into it net of tax and are 'grossed up' by the pension provider.
• Without relief at source: contributions paid to a scheme that has not already provided relief at source, such as a workplace scheme.

Note : In certain circumstances, the tax relief on contributions made by someone else can be claimed by the individual taxpayer, as if they had paid the contributions themselves. If this is the case, the pension contribution entries should be made in one of the first two boxes :pension contributions paid net with relief at source or pension contributions paid gross without relief at source (depending on the scheme). This will allow for tax relief to be provided if applicable.

Workplace pension scheme with relief at source: These contributions will be relieved at source because they have been paid by the employee out of gross salary and amounts can usually be found on your payslip. If you have paid contributions out of net pay, these should be treated as private pension contributions and entered into pension contributions paid net with relief at source.

• Your contributions as an employee: Enter workplace employee contributions       
• Your employer's contributions: Enter employer contributions

Salary sacrifice and flexible remuneration contribution: Contributions paid in this way will already have tax relief provided but need to be entered for annual allowance purposes. Enter salary sacrifice and flexible remuneration contributions in the boxes provided:

• Reduction of employment income through salary sacrifice (arrangement after 8 July 2015).              
• Reduction of employment income through flexible remuneration (arrangement after 8 July 2015). 

After entering all of your contributions, the Pension contribution summary will provide totals for :

• Total pension contributions: Total of all the above contributions.
• Annual Allowance: Annual Allowance for the 2023-24 tax year is *£60,000.
• Excess contributions: Total contributions in excess of the annual allowance.

* If your adjusted income is over £260,000 your annual allowance in the current tax year will be reduced.
It will not be reduced if your threshold income for the current tax year is £200,000 or less, no matter what your adjusted income is. To view the calculation of Adjusted and Threshold Income, click on ‘Show calculation’

Unused allowances brought forward:

Note: Annual allowance, Pension contributions and Allowance used are taken from the previous year's tax return upon import (if the wizard was used in the previous year)

For the previous 3 years, you can enter:

• Annual allowance: The annual allowance for the previous tax years is £40,000 unless tapered. If tapered then please enter the reduced allowance.
• Pension contributions: Enter the total pension contribution in the boxes provided for the previous tax years.
• Allowance used: If surplus allowances have been used in previous years, enter the amounts in order to reflect the correct unused allowances for the current year. 

 2023/24 annual allowance summary:

A)  2023-24 excess contributions: Displays the excess contributions after the annual allowance for the tax year is used (From section 1)

B)  Brought forward allowances used against 2023-2024*: Displays the brought forward allowance that is used against the excess (from section 2)

C)  Pension contributions in excess of brought forward allowances: Calculation is C = A minus B.
A pension savings tax charge will be calculated on the excess contributions in the tax year, if any.

* The annual allowance available in tax year is always utilised first, before any brought forward allowances are used.