The pension annual allowance sets the most you can save across your pensions each year before a tax charge applies. Understanding the limits (including tapering for high earners and the ability to carry forward unused allowance) is essential for maximising your pension savings without triggering an unexpected tax charge.
For the wider cluster covering pension tax relief, lump sums, drawdown tax planning and annuity choices, use the main Pension Tax hub.
Standard Annual Allowance
| Tax Year | Annual Allowance |
|---|---|
| 2026/27 | £60,000 |
| 2025/26 | £60,000 |
| 2024/25 | £60,000 |
| 2023/24 | £60,000 |
| 2022/23 | £40,000 |
The allowance covers all contributions: your personal contributions, employer contributions, and the tax relief added by HMRC. If your earnings are below £60,000, tax relief on your own contributions is limited to 100% of your relevant UK earnings (or £3,600 gross if higher), but your annual allowance is still £60,000.
Money Purchase Annual Allowance (MPAA)
If you have flexibly accessed your pension (taken more than the 25% tax-free lump sum), your future annual allowance dros to £10,000.
This is triggered by:
- Taking income through flexi-access drawdown
- Taking an uncrystallised funds pension lump sum (UFPLS)
- Taking income from a flexible annuity
Not triggered by:
- Taking the 25% tax-free lump sum only
- Buying a lifetime annuity that cannot decrease
- Taking a small pot (£10,000 or less)
- Receiving defined benefit pension income
Tapered Annual Allowance (High Earners)
For very high earners, the annual allowance is reduced:
The Two Tests
Both must be exceeded for the taper to apply:
| Test | Threshold |
|---|---|
| Threshold income | Over £200,000 |
| Adjusted income | Over £260,000 |
Threshold income = total taxable income minus personal pension contributions Adjusted income = threshold income plus employer pension contributions
How the Taper Works
| Adjusted Income | Annual Allowance |
|---|---|
| £260,000 or less | £60,000 (full) |
| £270,000 | £55,000 |
| £280,000 | £50,000 |
| £300,000 | £40,000 |
| £320,000 | £30,000 |
| £340,000 | £20,000 |
| £360,000+ | £10,000 (minimum) |
The allowance reduces by £1 for every £2 of adjusted income above £260,000.
Planning Around the Taper
- Salary sacrifice — reduces threshold income and may keep you below the taper threshold
- Pension contributions — personal contributions reduce threshold income (but not adjusted income)
- Timing — if income fluctuates, contribute more in lower-income years
Carry Forward
If you did not use your full annual allowance in the previous three tax years, you can carry the unused amount forward:
Rules
- You must have been a member of a registered pension scheme in the carry-forward years
- You use the current year’s allowance first, then the oldest year’s unused allowance
- Carry forward is available for 3 years only — unused allowance from year 4 is lost forever
- Tax relief on your own contributions is still limited to 100% of your relevant UK earnings in the current year
Example
| Tax Year | Allowance | Contributions | Unused |
|---|---|---|---|
| 2023/24 | £60,000 | £5,000 | £55,000 |
| 2024/25 | £60,000 | £10,000 | £50,000 |
| 2025/26 | £60,000 | £8,000 | £52,000 |
| 2026/27 | £60,000 | — | £60,000 |
| Total available in 2026/27 | — | — | £217,000 |
If you earn at least £217,000, you could contribute the full amount in 2026/27 and receive tax relief on all of it.
Who Benefits Most
- Bonus earners — use carry forward to make a large contribution in a bonus year
- Those receiving an inheritance — contribute a lump sum to your pension
- Late starters — catch up on pension contributions efficiently
- Business owners — contribute retained profits to a pension in a high-income year
Annual Allowance Charge
If you exceed your annual allowance, you pay an annual allowance charge — essentially the tax relief is withdrawn on the excess:
Calculating the Charge
| Excess Amount | Tax Band | Charge |
|---|---|---|
| £10,000 | Basic rate (20%) | £2,000 |
| £10,000 | Higher rate (40%) | £4,000 |
| £10,000 | Additional rate (45%) | £4,500 |
The charge is at your marginal tax rate and is declared on your Self Assessment return.
Scheme Pays
If the charge exceeds £2,000, you can ask your pension scheme to pay it from your pension pot — reducing your future pension but avoiding an immediate cash outflow.
Monitoring Your Allowance
To stay within limits:
- Check your annual pension statement from each scheme
- Add up all contributions (personal + employer) across all pensions
- Check whether you are affected by the tapered or money purchase annual allowance
- Review carry forward availability to see if extra room is available
- File carefully via Self Assessment — excess contributions must be declared
For a broader view of pension strategy, see our SIPP guide and pension contributions guide.
The Tapered Annual Allowance: High Earners Explained
If your income is high, a reduced (tapered) annual allowance applies. This was reformed significantly in 2023 and the current (2026/27) rules are:
- Threshold income: £200,000 (includes salary, bonuses, and employer pension contributions)
- Adjusted income: £260,000 (adds personal pension contributions back in)
- If your threshold income is over £200,000 and your adjusted income exceeds £260,000, the annual allowance tapers downward
- For every £2 of adjusted income over £260,000, the allowance reduces by £1
- Minimum tapered allowance: £10,000 (reduced from £4,000 prior to April 2023)
Example:
- Adjusted income: £300,000
- Excess over £260,000 = £40,000
- Allowance reduction = £40,000 ÷ 2 = £20,000
- Remaining allowance = £60,000 - £20,000 = £40,000
Senior NHS clinicians, Partners at professional firms, and high-earning executives are most affected.
Carry Forward: Using Previous Years’ Unused Allowance
If you haven’t used your full annual allowance in the previous three tax years, you can carry forward unused allowance to the current year. Rules:
- You must have been a member of a registered pension scheme in the years from which you carry forward
- Carry forward works in order from the earliest year first
- Tax relief on your own contributions in the carry-forward year is still limited to 100% of your relevant UK earnings for that tax year
- It does not affect the tapered annual allowance calculation
Example:
| Year | Allowance | Contributions | Unused |
|---|---|---|---|
| 2023/24 | £60,000 | £15,000 | £45,000 |
| 2024/25 | £60,000 | £20,000 | £40,000 |
| 2025/26 | £60,000 | £18,000 | £42,000 |
In 2026/27, you could contribute: £60,000 (current year) + £45,000 + £40,000 + £42,000 = up to £187,000, subject to tax relief being limited to 100% of your relevant UK earnings.
Carry forward is particularly valuable for those with irregular earnings (self-employed, partnership profit shares, bonus-heavy earners) who want to make a large pension contribution in a high-income year.
The Money Purchase Annual Allowance (MPAA)
If you have triggered the MPAA by flexibly accessing a defined contribution pension (e.g., taking a flexi-access drawdown, UFPLS, or flexible annuity), your annual allowance for money purchase (defined contribution) pensions drops to £10,000 per year.
The full £60,000 allowance still applies to defined benefit pension accrual, but most private sector employees won’t have DB pension access once they’ve flexibly accessed DC savings.
If you’re over 55 and considering drawing from your pension while still working and contributing, get advice on MPAA before doing so — you could permanently limit your future contribution options.
Defined Benefit Pensions and the Annual Allowance
For defined benefit (final salary) schemes, the annual allowance is calculated differently — you don’t look at contributions paid in:
- The pension input amount is calculated as: (closing pension × 16, plus any separate lump sum) minus (opening pension × 16, plus any separate lump sum, increased by CPI inflation)
- For most active DB members, this figure is automatically calculated by the scheme administrator
- High-accruing DB members (e.g., senior public sector workers) can breach the £60,000 allowance even without making extra voluntary contributions
If You Go Over the Allowance
How the Tax Charge Works
If your total contributions exceed the annual allowance, the excess is added to your taxable income and taxed at your marginal rate:
Example: Basic Rate Taxpayer
- Annual allowance: £60,000
- Total contributions: £65,000
- Excess: £5,000
- Tax charge: £5,000 × 20% = £1,000
Example: Higher Rate Taxpayer
- Annual allowance: £60,000
- Total contributions: £75,000
- Excess: £15,000
- Tax charge: £15,000 × 40% = £6,000
Example: Additional Rate Taxpayer
- Annual allowance: £60,000
- Total contributions: £80,000
- Excess: £20,000
- Tax charge: £20,000 × 45% = £9,000
You still keep the excess in your pension, the tax charge simply removes the tax advantage on the amount above the allowance.
How to Pay the Tax Charge
Self Assessment
You must report the excess on your Self Assessment tax return:
- Complete the ‘Additional Information’ pages (SA101)
- The charge is due by 31 January following the end of the tax year
- If you don’t normally file a return, you must register with HMRC
Scheme Pays
If the tax charge is over £2,000, you can ask your pension scheme to pay it from your pension pot:
- Mandatory Scheme Pays: Available if the charge exceeds £2,000 and you exceeded the standard annual allowance with that scheme: you must ask by 31 July the year after the tax year
- Voluntary Scheme Pays: Some schemes offer this even if you don’t meet the mandatory criteria
Your pension is reduced to cover the charge, but you avoid finding the cash yourself.
How to Avoid Exceeding the Allowance
| Strategy | How It Helps |
|---|---|
| Track all contributions | Check payslips, pension statements, and any personal contributions |
| Use carry forward | Maximise contributions using unused allowance from previous years |
| Salary sacrifice timing | Spread large contributions across tax years |
| Reduce employer contributions | If close to the limit, ask to reduce employer payments temporarily |
| Check your pension annual statement | Most providers send a summary of contributions each year |
Working Out Your Allowance
Practical planning checklist
- Check total contributions across all schemes (personal + employer + tax relief)
- Calculate adjusted income if your salary exceeds £200,000
- Check carry forward availability for the last three tax years via your pension provider or HMRC records
- If you are 55+, check whether you have already triggered the MPAA
- If you plan to make a large one-off contribution (business sale, inheritance, bonus), check available carry forward first
What Counts as Pension Input
What Counts as Pension Input
The annual allowance applies to the total pension input period: the total of your contributions, your employer’s contributions, and any government top-up (basic rate tax relief added by the scheme).
For defined contribution (DC) pensions:
- All contributions regardless of source, yours, employer, and third party (e.g. a spouse paying into your pension)
- Personal contributions get 20% basic rate relief added, so a £800 personal contribution = £1,000 pension input
For defined benefit (DB) pensions:
- Annual allowance test measures the increase in the pension value during the year, multiplied by 16 (the prescribed accrual factor), plus any lump sum increases
- A DB scheme that increases your annual pension entitlement by £3,000 adds £48,000 (£3,000 × 16) to your pension input: this can catch people unaware, particularly those receiving large pension increases from career progression
If you are in both DB and DC schemes, the pension inputs are combined and tested against the £60,000 allowance (or MPAA/tapered where applicable).
Deadlines
The Real Cut-Off: Earlier Than You Think
Most people know the tax year ends on 5 April. What they don’t know is that pension providers have their own processing cut-offs: often days before 5 April.
Why the gap matters:
- Bank transfers (BACS) take 1–3 working days to process
- SIPP platforms often close to new contributions at 4–5 pm on the final day
- Some providers require card payments or debit submissions by 4 April or earlier
Check your SIPP/pension provider’s published cut-off: most publish this in February/March each year on their website or in their tax year-end communications.
Safe rule of thumb: Submit pension contributions by 31 March to have certainty they’re processed in time. If paying in April, confirm your provider’s exact cut-off date.
Key Dates for 2026/27
| Date | Action |
|---|---|
| 31 January 2027 | 2025/26 Self Assessment deadline; any 2025/26 pension contributions from prior year should already be reflected |
| 31 March 2027 | Safe internal deadline for pension contributions (avoid processing risk) |
| 5 April 2027 | Official last day for 2026/27 pension contributions |
| 6 April 2027 | New 2027/28 allowance begins |
| 31 October 2027 | 2026/27 paper Self Assessment deadline |
| 31 January 2028 | 2026/27 online Self Assessment deadline; claim higher-rate pension relief here |
Pension Contribution Deadline Checklist
| Task | Done? |
|---|---|
| Check total 2026/27 contributions to date | ☐ |
| Calculate remaining Annual Allowance | ☐ |
| Check carry-forward from 2023/24–2025/26 | ☐ |
| Check provider’s actual cut-off date | ☐ |
| Submit any additional contribution by deadline | ☐ |
| Note contribution for Self Assessment (higher-rate relief) | ☐ |
Related Guides
- Pension Contributions Guide — how much to contribute and when
- SIPP Guide — self-invested personal pensions
- Pension Tax Relief Guide — maximising tax efficiency
- Salary Sacrifice Guide — reducing income and NI through salary sacrifice
- Should I Max Out ISA or Pension First? — comparing the two main tax wrappers