A pension input period is used by Her Majesty's Revenue & Customs (HMRC) to determine which tax year your contributions are treated for tax purposes.
The annual allowance for a tax year is tested against pension savings made during the pension input period ending in that tax year.
All pension input periods run from 6 April to 5 April.
The Annual Allowance for most people for the tax year 2017/2018 is £40,000 unless you have a reduced annual allowance (£4,000) based on having taken a cash lump sum or Flexi-Access Drawdown direct from your pension pot since 6 April 2015. For those with earnings over £110,000 a year, and £150,000 a year when total pension contributions are included, the annual allowance may reduce below £40,000 but not less than £10,000.
Your Annual Allowance takes into account gross contributions paid by you and any contributions paid by your employer or third parties to any registered pension scheme.
If the total contributions to all of your pensions add up to more than the Annual Allowance, you will have to pay a tax charge on the amount paid above the Annual Allowance.
The Annual Allowance will not apply in the tax year in which you die or if you take your benefits on the grounds of serious ill health. Your Annual Allowance takes into account gross contributions paid by you and any contributions paid by your employer or third parties to any registered pension scheme. This includes any benefits that might be building up in defined benefit schemes.
If the total amount built up in registered pension schemes each year, by you or on your behalf, adds up to more than the Annual Allowance, you will have to pay a tax charge on the amount paid above the Annual Allowance.
Where the total of the contributions to all of your registered pension schemes exceeds the annual allowance in a given year, unused allowances from up to three previous tax years may be available. The annual allowance for the last three tax years is assumed to be £40,000 for this purpose. If you have taken a cash lump sum or Flexi-Access Drawdown direct from your pension pot since 6 April 2015 you can’t top it up with unused allowance from previous years.
To be able to do this you must have been a member of a registered pension scheme in the tax year(s) from which you wish to make use of any unused allowance. If you think this may affect you please contact your financial adviser.
I have been using the tax year from my tax return, what should I do?
As the pension input period is based on the tax year, you don't need to do anything.
I have been using the anniversary of my first contribution following 6 April 2006 for my tax return, what should I do?
You'll be liable for any Annual Allowance charge that arises as a result of the change in the pension input period. You'll be able to claim any repayment of any overpayment that may arise as a result of the change. A repayment claim can be made up to six years after the end of the tax year in which the overpayment was made.
More information can be found on the HM Revenue & Customs pensions website.
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