The £60,000 Annual Allowance
The annual allowanceThe most you can pay into pensions each tax year with tax relief - £60,000 for 2026/27, covering your own, your employer's and any third-party contributions. Exceeding it triggers a tax charge. is the maximum amount of pension savings you can make in a tax year (6 April to 5 April) without incurring a tax charge. For 2026/27, it is £60,000 - unchanged since 2023/24, when it was raised from £40,000.
The £60,000 covers all contributions to all your pension schemes in the tax year: your own contributions, your employer's contributions, and any third-party contributions. For defined-benefit (DB) schemes, it is measured by the increase in the value of your benefits over the year (the "pension input amount"), not a cash figure you paid in.
There is no separate limit on how much you can contribute - you can pay in more than £60,000 - but anything above the annual allowance triggers a tax charge. Tax relief on your personal contributions is separately capped at the higher of £3,600 or 100% of your UK taxable earnings.
Carry Forward - Using Unused Allowance from Previous Years
If your pension savings in any of the previous 3 tax years were below the annual allowance for that year, you can carry the unused amount forward and add it to your current-year allowance. You do not need to make a claim - carry forwardAdding unused annual allowance from the previous 3 tax years to the current year's allowance. You must have been a pension scheme member in each year you carry forward from. is automatic. But you must have been a member of a registered pension scheme in each year you carry forward from.
The order is strict: you use the current year's £60,000 first, then the earliest unused year, then the next, then the most recent.
A worked example. Priya earned £90,000 in 2026/27 and wants to make a large one-off pension contribution. Her contribution history:
2023/24 - contributed £20,000 (allowance £60,000, unused £40,000). 2024/25 - contributed £15,000 (allowance £60,000, unused £45,000). 2025/26 - contributed £25,000 (allowance £60,000, unused £35,000).
Priya's total available allowance for 2026/27 is £60,000 + £40,000 + £45,000 + £35,000 = £180,000 - used in the strict order above: this year's allowance first, then the oldest unused year, working forward. She can contribute up to £90,000 with personal tax relief (capped at 100% of earnings), plus her employer could contribute the remaining £90,000 without triggering an annual allowance charge.
If Priya had not been a member of any pension scheme in 2023/24, she could not carry forward from that year - the available total would drop to £140,000.
The Tapered Annual Allowance - High Earners
If you earn above certain thresholds, your annual allowance is reduced under the tapered annual allowanceThe reduction of the annual allowance for high earners: once adjusted income tops £260,000, the allowance falls £1 for every £2 of excess, down to a £10,000 floor at £360,000.. Two income tests apply, and both must be exceeded for the taper to bite:
Threshold income - your total taxable income minus your personal pension contributions. If this is £200,000 or below, the taper does not apply regardless of your adjusted income. Adjusted income - your threshold income plus all pension contributions (including employer contributions and DB accrual). If this exceeds £260,000, your annual allowance is reduced by £1 for every £2 above that threshold, down to a minimum of £10,000.
The minimum £10,000 floor is reached at an adjusted income of £360,000. Above that, the taper has no further effect - the allowance stays at £10,000.
A worked example. James has a salary of £280,000 and his employer pays £30,000 into his pension. His threshold income is £280,000 (above £200,000). His adjusted income is £310,000 (£280,000 + £30,000). The excess over £260,000 is £50,000. His annual allowance is reduced by £25,000 (£50,000 ÷ 2), giving him a tapered allowance of £35,000.
James's employer has already contributed £30,000 - within his £35,000 tapered allowance, but leaving only £5,000 of headroom for personal contributions before the charge applies.
Salary sacrifice interaction. Salary sacrifice pension contributions reduce your taxable income but are treated as employer contributions for adjusted-income purposes. This means salary sacrifice lowers your threshold income (which may keep you below £200,000) but does not reduce your adjusted income. For some earners near the £200,000 threshold-income boundary, salary sacrifice can avoid the taper entirely.
The Money Purchase Annual Allowance (MPAA)
If you have flexibly accessed a defined-contribution pension - for example, by taking a cash withdrawal (UFPLS) or income from a flexi-access drawdown fund - your annual allowance for future money-purchase contributions drops to £10,000. This is the MPAAMoney Purchase Annual Allowance: A reduced £10,000 annual allowance for defined-contribution pensions, triggered once you flexibly access a pension (such as taking drawdown income). It cannot be reversed or carried forward., and it applies from the moment of the first flexible withdrawal onwards. It cannot be reversed.
The MPAA applies only to money-purchase (defined-contribution) savings. If you also have defined-benefit pension accrual, the remaining allowance for DB is calculated as the alternative annual allowance: £60,000 minus £10,000 = £50,000 for 2026/27.
Crucially, once the MPAA is triggered, you cannot carry forward unused money-purchase annual allowance. The carry-forward mechanism described above only applies to the main annual allowance (or the alternative annual allowance for DB benefits).
Actions that do not trigger the MPAA include: taking a tax-free lump sum (PCLS) and moving the rest into drawdown without withdrawing income, taking a small pot lump sum from a pot of £10,000 or less, and receiving a defined-benefit pension. See our guide to pension lump sum tax for the detail on which withdrawal methods trigger the MPAA and which do not - or use the Pension Lump Sum Tax Calculator to model your specific withdrawal. The same flexible withdrawal that triggers the MPAA is often emergency-taxed on the way out - our guide covers how to reclaim it with P55, P53Z or P50Z.
The Annual Allowance Tax Charge
If your total pension savings in 2026/27 exceed your available annual allowance (after carry forward), the excess is taxed at your marginal rate of income tax. The charge is added to your Self Assessment tax return using the "Pension savings tax charges" section (supplementary pages SA101).
If the charge exceeds £2,000 and is attributable to a single scheme, you can ask that scheme to pay it on your behalf through "Scheme Pays" - the scheme settles the tax charge and reduces your future benefits accordingly. Your pension scheme must offer mandatory Scheme Pays if the charge exceeds £2,000 and you exceeded the standard £60,000 allowance within that scheme. You must notify the scheme by 31 July of the year after the tax year following the one the charge arose in - for a 2025/26 charge, by 31 July 2027. If you are weighing up carry forward against paying the charge, our guide to the annual allowance charge and Scheme Pays walks through what to do - including why most tapered earners cannot use mandatory Scheme Pays.
Carry Forward and the Taper - How They Interact
If the taper applies in the current year, your current-year allowance is reduced - but the carry-forward amounts from previous years are based on the annual allowance that applied in those years, reduced by what you actually contributed. If the taper also applied in a previous year, the unused amount from that year is calculated against the tapered (not the full) allowance for that year.
This means high earners who were subject to the taper in all four relevant years may have a cumulative available allowance far below £240,000. If the taper reduced the allowance to £10,000 in each of the previous 3 years and the current year, and the individual used the full £10,000 each time, there is nothing to carry forward.
Planning Ahead - The Pension Annual Allowance in Context
The annual allowance interacts with several other pension rules. Employer contributions are the most tax-efficient route for company directors - deductible against corporation tax, free of employer NIC, and outside your personal income for tax purposes (see our director salary and dividend strategy guide). But from 6 April 2029, under a measure announced at the Autumn Budget 2025, only the first £2,000 a year of pension contributions made by salary sacrifice keeps its National Insurance exemption. Salary-sacrifice contributions above £2,000 become subject to both employer and employee NICs, though income-tax relief is unaffected.
From April 2027, unused pension pots enter the IHT estate. Maximising pension savings now - particularly by using carry forward to make large one-off contributions - may create an IHT liability on death that did not exist before. If the goal is to retire early, the balance between filling your pension and keeping enough accessible ISA savings is itself a decision - see our guide to retiring before 57. The interaction between annual allowance planning and IHT is explored in our guide to the 2027 pension IHT changes.