Carry Forward: Worked Examples

Our main Annual Allowance Tax Charge Explained guide introduces carry-forward as a concept. This page goes further: three fully worked scenarios, computed using this site's own real carry-forward function, showing exactly how unused allowance from the previous three tax years is identified, ordered, and applied — including the two situations that trip people up most: a prior year with no scheme membership, and a prior year that was itself tapered or breached. To run your own three prior years through the same steps, our carry forward calculator does it for you, free.

The rules carry-forward actually follows

• • Three prior tax years only — no further back than that
• • Oldest year applied first — three years ago, then two years ago, then one year ago, until the current excess is covered or the years run out
• • Scheme membership is the eligibility test — not how much you contributed or how much your pension grew that year
• • Each prior year uses its own applicable allowance — the standard £60,000 for most years, but a tapered figure for any year you were a higher earner subject to tapering
• • A breach year (or a year fully used up) contributes zero — unused amounts floor at zero, they never go negative and reduce other years

Scenario 1: fully covered from one prior year

A senior nurse's Pension Input Amount jumps to £75,000 in the current year following a promotion, against the standard £60,000 allowance — an excess of £15,000. Her previous three years were all quiet, ordinary growth years.

Because carry-forward is applied oldest year first, the entire £15,000 excess is absorbed by the unused allowance from three years ago alone — the more recent two years aren't needed at all, even though they also have unused allowance sitting unused in reserve.

Scenario 2: partially covered, a career break year

A consultant's Pension Input Amount reaches £96,000 after a big pay award — an excess of £36,000. His two earlier years were fairly high-growth years already, and — critically — he took a career break one year ago and wasn't a registered pension scheme member at all that year.

Even though he has two genuinely quiet prior years of unused allowance, the career-break year's zero contribution — because scheme membership, not just low growth, is the eligibility test — means carry-forward only covers part of this year's excess. The remaining £26,000 is still potentially chargeable, which is exactly the kind of position where Scheme Pays becomes relevant.

Scenario 3: a prior tapered year and a prior breach year

A very senior clinician's Pension Input Amount reaches £70,000 this year — an excess of £10,000. Three years ago he was a higher earner subject to tapering, with a reduced allowance that year; one year ago he had another high-growth year that itself breached his allowance.

Two details matter here. First, three years ago used its own tapered allowance (£40,000) to work out unused headroom, not the standard £60,000 figure — using the standard figure by mistake would have overstated his real position. Second, one year ago — a year he breached his own allowance — contributes precisely nothing, rather than being averaged out or offset against the quieter year in between.

What the three scenarios show together

• ✓ Scenario 1: a £15,000 excess was fully covered by the oldest prior year alone, oldest-first
• ✓ Scenario 2: a career-break year contributing zero meant only £10,000 of carry-forward was available, leaving £26,000 still chargeable despite two genuinely quiet prior years
• ✓ Scenario 3: correctly using a prior tapered year's own reduced allowance, and correctly treating a prior breach year as contributing zero, still fully covered a £10,000 excess
• ✓ Scheme membership, not contribution level or pension growth, is what makes a prior year's allowance available at all — a career break or gap year is the single most common reason carry-forward covers less than expected

This guide is independent, general information only — not financial or tax advice — and FrontlinePay is not affiliated with NHS England, NHS Pensions/NHSBSA, HMRC or the Department of Health and Social Care. The worked examples use illustrative figures — they are not a calculation of your own position. Confirm your own three prior years' figures against your NHS Pensions Pension Savings Statement, and use the Annual Allowance Calculator or a specialist adviser for your own numbers.