Ordinarily, the tax charge is paid through the self-assessment process. This can however, prove to be an issue if the individual does not have the cash to pay the tax charge.

While personal contributions exceeding the allowance is often simply negated by the tax relief earned, those falling foul due to excess employer contributions will need to find a cash sum for the charge.

Owing to this issue, if the tax liability exceeds £2,000, and provided it is the standard Annual Allowance (not the Tapered Annual Allowance or the Money Purchase Annual Allowance) that has been exceeded, the individual can request for their pension scheme provider to pay the bill from their pension fund. 

Lest we forget, that even once the Annual Allowance tax charge is paid, the excess contribution now sits within the pension scheme. So upon subsequent withdrawal, 75 per cent of the amount could be taxed further. 

All in all, what at first seems like a harmless calculation to determine a highly advantageous allowance is in fact an incredibly technical and obstacle-strewn process, which could ultimately result in additional tax being paid, instead of tax being saved.

Therefore, should carry forward be of interest – people should always get financial advice.”

David Smith is director of financial planning at Tilney