Illustration - annual allowance
You'll learn how the annual allowance works in practice and how to calculate whether a pension contribution triggers an annual allowance charge.
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In this lesson
- 0:00 Annual allowance and charge explained
- 1:35 Calculating unused relief over multiple years
- 3:43 Annual allowance charge calculation
- 5:36 Integrating annual allowance charge into tax computation
About this lesson
This video walks through three real-world scenarios: calculating reduced allowances when income exceeds thresholds, tracking unused allowance across multiple years and carrying it forward, and working out the annual allowance charge itself and how it affects your tax bill. Essential for understanding how high earners' pension contributions are taxed under ACCA TX and ATX. The first example shows how threshold income and adjusted income determine your annual allowance, and how it reduces by £1 for every £2 you exceed £260,000. The second illustrates the three-year carry-forward rule for unused allowance—a common exam trap where students forget the time limit or that you must have been in a scheme. The third brings it all together: calculating the charge when contributions exceed your available allowance, and seeing how it slots into your income tax computation at the marginal rate. By the end, you'll see why the annual allowance matters and how to handle it confidently in exam questions.
Duration: 7m
Transcript
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