Please note, the information presented in this page is for illustrative purposes only and does not constitute tax advice or recommendations.
He earns a base salary of £100K and has just received a generous bonus of £80K.
A colleague mentions carry forward and explains how John could still make use of surplus pension contributions from the last two years.
It turns out that John has £80K of spare personal allowance to play with. He decides to put his full bonus into his pension and we add tax relief of £20K, bringing his gross contribution to £100K.
Following our advice, he uses this year’s allowance of £25K (reduced from the £40K allowance due to pension tapering rule - see ‘in more detail’ section below), leaving £75K which is covered by two years’ of unused allowance. Result.
It's the easy way to understand all the financial stuff you feel you should know but somehow missed.