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Carry forward

  • 2 min read

To carry forward means to claim a loss from a previous tax year as an expense in the current one. If you lost £10,000 investing in Bitcoin, for instance, you could claim that as an expense against any profits you make in the following tax year.  

But it’s not just losses that you can carry forward. You can also use this process with unused annual allowances. 

How does it work with a pension?

The Pension Annual Allowance is the maximum amount that you can pay into your pension in a tax year. It’s based on your income but it’s up to £60,000 in the 2023/24 tax year. In order to be able to carry forward, you need to pay the maximum amount into your pension in a tax year. As soon as you’ve done this, you’re allowed to use up to three previous year’s worth of unused allowance to add more to your pension pot. But:

  • You can’t contribute more than you’ve earned in a tax year
  • You must have been a member of a private pension scheme for each year you’re carrying forward

Also be aware that if you do this, it will need to be declared on a tax return and you won’t be eligible to claim the pension tax relief on your extra contributions. Here’s a quick example of how you could use it:

Tax year Annual allowance Total contribution Unused allowance
2021/21 £40,000 £10,000 £30,000
2021/22 £40,000 £30,000 £10,000
2022/23 £40,000 £30,000 £10,000

In the above example, you could use the unused £50,000 allowance to contribute £90,000 into your pension in a single tax year. But to do this, you must have earned at least £90,000 in wages. 

How do I carry forward a loss? 

  1. Claim the loss on your Self Assessment tax return. Even if it’s tempting not to file a return if you made a loss, it’s worth doing. You can claim it back next year 
  2. Only claim the loss against profit of the same kind. Put simply, if you lose money trading Bitcoins one year, you can’t claim this loss as an expense the following year if you make profit selling a house

To read in more detail about how to claim your losses, take a look at the HMRC website.

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