What the pension annual allowance is
The annual allowance is the most you can pay into pensions in a tax year while still getting tax relief. For 2026-27 the standard allowance is £60,000. It covers everything going in: your own contributions, the tax relief added on top, and anything your employer pays. Go over it and the excess is taxed, which cancels out the relief you would otherwise have had.
The tapered annual allowance for high earners
If you are a high earner, your allowance can be cut by the taper. Once your adjusted income goes over £260,000, the £60,000 allowance falls by £1 for every £2 above that, down to a floor of £10,000 at adjusted income of £360,000 and above. There is a gate: the taper only bites if your threshold income is also over £200,000, so a one-off spike from, say, employer contributions will not always trigger it. A worked example: with adjusted income of £300,000, your allowance is reduced by (£300,000 − £260,000) ÷ 2 = £20,000, leaving a tapered allowance of £40,000.
Carry forward from the last three years
Unused allowance does not have to go to waste. If you paid in less than your allowance in any of the previous three tax years, you can carry that unused amount forward and add it to this year. You need to have been a pension scheme member in those years, and you always use the current year first before drawing on carried forward allowance. Carry forward is what lets some people pay in well over £60,000 in a single year.
Frequently asked questions
What is the pension annual allowance for 2026-27?
The standard annual allowance is £60,000 for 2026-27. This is the most you can pay into pensions each year, from all sources, while still getting tax relief. High earners can have this reduced by the taper, and anyone who has flexibly accessed a defined contribution pension is limited to the £10,000 Money Purchase Annual Allowance.
How does the tapered annual allowance work?
If your adjusted income is over £260,000, your £60,000 allowance drops by £1 for every £2 above that figure, down to a minimum of £10,000 once adjusted income reaches £360,000. The taper only applies if your threshold income is also over £200,000, so if you are under that threshold you keep the full allowance whatever your adjusted income.
What is included in the £60,000 pension allowance?
Everything paid into your pensions in the tax year counts: your own contributions, the tax relief added to them, and anything your employer pays in. For a defined benefit scheme it is the growth in your promised pension over the year, not the cash paid, that counts towards the allowance.
How does carry forward work?
If you did not use all of your annual allowance in the previous three tax years, you can carry the unused amount forward and add it to this year's allowance. You must have been a pension scheme member in those years, and you use the current year's allowance first before dipping into carried-forward amounts. Carry forward cannot be used against the MPAA.
What is the annual allowance charge?
If your contributions go over your available allowance, the excess is added to your taxable income and taxed at your marginal rate, 20%, 40% or 45%. This is the annual allowance charge. You declare it on your Self Assessment tax return, and in some cases your pension scheme can pay it for you under Scheme Pays.
What is the Money Purchase Annual Allowance (MPAA)?
Once you flexibly access a defined contribution pension, for example by taking taxable income through drawdown or a lump sum, your allowance for future money purchase contributions falls to £10,000 a year. This is the MPAA. Carry forward is not available against it.
Covers UK annual allowance rules for 2026-27. Defined benefit schemes measure pension input differently. General information, not financial advice.
