Pension Carry Forward Guide UK 2026 — Use Unused Allowance

Pension carry forward is a powerful but underused tax relief. If you have spare cash and unused allowance, you could save significant tax.

How Carry Forward Works

The Basic Rule

Principle	Detail
Annual Allowance	£60,000 (2024/25 onwards)
Unused allowance	Can be carried forward
Carry forward period	3 previous tax years
Order of use	Current year first, then oldest year

Example

Tax Year	Allowance	Used	Unused
2023/24	£60,000	£10,000	£50,000
2024/25	£60,000	£15,000	£45,000
2025/26	£60,000	£20,000	£40,000
2026/27	£60,000	Current year	£60,000
Available 2026/27			£195,000

Who Can Use Carry Forward?

Requirements

Condition	Detail
Must have been in a pension scheme	In years you’re carrying from
Must have relevant UK earnings	In year of contribution
Contribution can’t exceed earnings	In the year you contribute

“In a Pension Scheme”

Counted As Being In a Scheme
Workplace pension (auto-enrolment)	Yes
SIPP/personal pension	Yes
Frozen/dormant pension	Yes (if open)
Only State Pension	No

Even a workplace pension with £0 contributions counts.

Carry Forward Calculator

Step-by-Step

Step	Action
1	Find your pension contributions for each of last 3 years
2	Calculate unused allowance each year
3	Add up available carry forward
4	Add current year allowance
5	Cap at your earnings

Example: High Earner Making Large Contribution

Tax Year	Annual Allowance	Total Contributions	Unused
2023/24	£60,000	£8,000	£52,000
2024/25	£60,000	£8,000	£52,000
2025/26	£60,000	£8,000	£52,000
2026/27 (current)	£60,000	-	£60,000
Total available			£216,000

If earnings are £150,000, can contribute up to £150,000.

Tax Relief on £100,000 Contribution

Tax Rate	Relief Claimed	Effective Cost
Basic (20%)	£20,000	£80,000
Higher (40%)	£40,000	£60,000
Additional (45%)	£45,000	£55,000

Annual Allowance History

Previous Years’ Allowances

Tax Year	Standard AA	Notes
2023/24	£60,000	Increased from £40k
2024/25	£60,000
2025/26	£60,000
2026/27	£60,000

If You Had Tapered Allowance

If Adjusted Income Over	Your Allowance Was
£260,000+ (2023/24 on)	Reduced by £1 per £2 over £260k
Minimum	£10,000

Your carry forward is based on YOUR allowance, which may have been tapered.

Tapered Annual Allowance

Who Is Affected

Income Test	Threshold
Threshold income	Over £200,000
AND Adjusted income	Over £260,000
Taper	£1 reduction per £2 over £260k
Minimum allowance	£10,000 (at £360,000+)

Adjusted Income Calculation

Item	Include
Taxable income	All sources
PLUS employer pension contributions	Added back
PLUS salary sacrifice	Added back
= Adjusted income	For taper test

Example: Tapered Allowance

Detail	Amount
Salary	£250,000
Employer pension	£30,000
Adjusted income	£280,000
Over £260,000 by	£20,000
Taper (£1 per £2)	£10,000 reduction
Your Annual Allowance	£50,000

Common Carry Forward Scenarios

Scenario 1: Bonus Year

Situation	Action
Normal salary: £80,000	£8k pension contributions
This year + £100k bonus	£180,000 total income
Carry forward available	£150,000
Contribution possible	£150,000 (capped by available)
Tax relief at 40%/45%	£60,000+

Scenario 2: Business Sale

Situation	Action
Business sold	Large capital receipt
Earnings from business	£200,000 in final year
Carry forward available	£180,000
Contribution possible	£180,000
Reduces tax bill significantly

Scenario 3: Inheritance/Gift

Situation	Action
Received inheritance	£200,000
Current earnings	£60,000
Carry forward available	£120,000
Maximum contribution	£60,000 (earnings cap)

Scenario 4: Catching Up

Situation	Action
Age 50, minimal pension	Want to catch up
Income	£100,000
Carry forward	£180,000 available
Can contribute	£100,000 (earnings capped)
Would need multiple years	To use all carry forward

How to Make the Contribution

Personal/SIPP Contribution

Method	Process
Pay into SIPP	Online transfer
Tax relief at source	Auto 20% added
Higher rate claim	Via Self Assessment

Employer Contribution

Method	Process
Ask employer	To make one-off contribution
No contribution limits	Just annual allowance
Full relief	Including employer NI saving
Salary sacrifice	Can be more efficient

Example: £100,000 Contribution Methods

Method	You Pay	In Pension	Tax Relief
Personal contribution	£80,000	£100,000	£20k auto + claim more
Employer contribution	£0 (salary reduced)	£100,000	No income tax or NI

Employer contributions avoid NI — potentially more efficient for large amounts.

Restrictions to Know

Money Purchase Annual Allowance (MPAA)

If You’ve Accessed Pension Flexibly
MPAA triggered	Only £10,000 allowance
Can’t carry forward	From pre-trigger years
Still have current year	£10,000

What Triggers MPAA

Trigger	Not a Trigger
Flexi-access drawdown (income taken)	Taking 25% tax-free cash only
UFPLS (uncrystallised payment)	Buying annuity
Taking taxable lump sum	Capped drawdown (pre-2015)

Tip

Don’t access pension flexibly if you might make large contributions.

Pension vs ISA for Large Amounts

If You Have £100,000 to Invest

Consideration	Pension	ISA
Tax relief	40-45%	None
Access	From 55/57	Anytime
ISA limit	£20,000/year	Takes 5 years
Tax on withdrawal	75% taxable	None

Pension wins for most higher rate taxpayers, but ISA provides flexibility.

Documentation Required

For Self Assessment

Evidence	Why
Previous years’ contributions	To calculate carry forward
P60s	Prove earnings
Pension statements	Confirm amounts
Employer records	For employer contributions

HMRC Checks

If HMRC Queries	Have Ready
Proof of pension membership	In carry forward years
Contribution amounts	Each year
Earnings	In contribution year

Key Takeaways

1. 3 years carry forward — plus current year
2. Must have been in scheme — in years you carry from
3. Earnings capped — can’t exceed your earnings
4. Check tapering — if income over £260k
5. Employer contributions — may be more efficient
6. Don’t trigger MPAA — if planning large contribution

For related content, see our pension guide, salary sacrifice calculator, and pension vs ISA calculator.