R04 Annual allowance, taper and carry forward: free practice questions

1. Question 1 of 5

   What is the standard annual allowance for 2026/27?

   Option A: £40,000Option B: £10,000Option C: £50,000Option D: £60,000

   Show answer

   The answer is D: £60,000

   The annual allowance has been £60,000 since 2023/24. It was £40,000 from 2014/15 to 2022/23.

   Why the other options are wrong

   A

   £40,000 applied from 2014/15 to 2022/23.

   B

   £10,000 is the MPAA and the minimum tapered allowance.

   C

   £50,000 applied in 2011/12 to 2013/14 and is now the alternative annual allowance.

2. Question 2 of 5

   A DB scheme provides a separate lump sum as well as a pension. How is the lump sum treated in valuing pension input?

   Option A: Multiplied by 16 in the same way as the pensionOption B: Multiplied by 20, the old benefit crystallisation factorOption C: Ignored altogether, as only the pension countsOption D: Added to the pension value, without the factor of 16

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   The answer is D: Added to the pension value, without the factor of 16

   Only the pension is multiplied by 16. Any separate lump sum entitlement is added as it is.

   Why the other options are wrong

   A

   The factor of 16 applies only to the pension.

   B

   20 was the BCE factor under the old LTA regime.

   C

   The separate lump sum is included, just not multiplied.

3. Question 3 of 5

   Ade's threshold income is £380,000 and his adjusted income is £420,000. What is his tapered annual allowance?

   Option A: £10,000Option B: £0Option C: £20,000Option D: £60,000

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   The answer is A: £10,000

   The excess of £160,000 would cut £80,000, but the maximum reduction is £50,000, so the allowance can't fall below £10,000.

   Why the other options are wrong

   B

   The tapered allowance can't fall below £10,000.

   C

   £20,000 doesn't follow the taper rules.

   D

   The taper applies as both tests are exceeded.

4. Question 4 of 5

   Which condition must be met to carry forward unused annual allowance from an earlier year?

   Option A: Having had relevant UK earnings chargeable to tax in that yearOption B: Having paid a pension contribution of some kind in that yearOption C: Membership of a registered scheme at some time in that yearOption D: Having been an active member of a scheme throughout that year

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   The answer is C: Membership of a registered scheme at some time in that year

   Membership of any kind (active, deferred, pensioner or pension credit) at some point in the year is enough. No input or earnings in that year are needed.

   Why the other options are wrong

   A

   Earnings in earlier years don't matter.

   B

   No contribution is needed in the earlier year.

   D

   Deferred or pensioner membership also counts.

5. Question 5 of 5

   A higher rate taxpayer with large dividend income exceeds the annual allowance. At what rate is the charge on the excess?

   Option A: 40%, the rate for earned incomeOption B: 45%, the additional rateOption C: 35.75%, the higher dividend rateOption D: 20%, the basic rate

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   The answer is A: 40%, the rate for earned income

   The excess sits on top of all income, but the charge always uses the earned income rates of 20%, 40% and 45%.

   Why the other options are wrong

   B

   The excess doesn't reach the additional rate band here.

   C

   Dividend rates don't apply to the annual allowance charge.

   D

   The excess falls in the higher rate band here.

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