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