What the annual allowance is
The annual allowance is the most that can be saved into your pensions in a tax year before a tax charge applies. For 2026/27 the standard allowance is £60,000. It is a limit on pension savings, not on tax relief, and it counts everything going in:
- Money purchase (defined contribution) pensions. Your contributions, your employer's contributions and anyone else's, all gross;
- Defined benefit pensions. The increase in the value of your benefits over the year, called the pension input amount, which your scheme can tell you;
- Salary sacrifice. Pay given up in exchange for employer contributions counts as an employer contribution.
Separately, you only get tax relief on your own contributions up to 100% of your earnings for the year. The calculator does not test that limit.
The tapered annual allowance
High earners have a reduced allowance. The taper applies only when both tests are met:
| Test | 2026/27 limit | How it is worked out |
|---|---|---|
| Threshold income | Over £200,000 | Net income, plus salary sacrificed for pension since 9 July 2015, less gross relief-at-source contributions |
| Adjusted income | Over £260,000 | Net income plus all pension savings (including employer contributions), less gross relief-at-source contributions |
The allowance falls by £1 for every £2 of adjusted income above £260,000, with the reduction rounded down to the nearest pound. It cannot fall below £10,000, which is reached at adjusted income of £360,000. If your threshold income is £200,000 or less, the taper does not apply however high your adjusted income is.
The money purchase annual allowance
Once you have flexibly accessed a pension, for example by taking taxable income from flexi-access drawdown or an uncrystallised funds pension lump sum, the money purchase annual allowance (MPAA) of £10,000 applies to money purchase savings. Taking only your tax-free lump sum does not trigger it. If your money purchase savings go over £10,000, any defined benefit savings are tested against an alternative allowance of £50,000 (less any taper), and HMRC uses whichever calculation gives the larger excess. Carry forward cannot be used against the MPAA itself.
Carry forward
If you have not used your full allowance in the previous three tax years, you can carry the unused part forward. For 2026/27 that means unused allowance from 2023/24, 2024/25 and 2025/26, when the standard allowance was £60,000 in each year. You must have been a member of a registered pension scheme at some point in each year you carry forward from, even if nothing was paid in.
The order is fixed: the current year's allowance is used first, then the unused allowance from the earliest year. If you had the taper in an earlier year, use the reduced allowance for that year when entering it. If your charge for an earlier year was worked out under the MPAA, use the alternative annual allowance for that year and compare it with your defined benefit savings only.
Worked example
A company director has taxable income of £90,000 in 2026/27 and the company pays £130,000 into their personal pension. In the previous three years their pension savings were £30,000, £45,000 and £50,000. Threshold income is £90,000, so there is no taper.
| Step | Amount |
|---|---|
| 2026/27 annual allowance | £60,000 |
| Unused from 2023/24 (£60,000 − £30,000) | £30,000 |
| Unused from 2024/25 (£60,000 − £45,000) | £15,000 |
| Unused from 2025/26 (£60,000 − £50,000) | £10,000 |
| Total available | £115,000 |
| Excess over the allowance | £15,000 |
| Annual allowance charge at 40% | £6,000 |
After the personal allowance, their taxable income is £77,430, so the £15,000 excess falls entirely in the higher rate band and the charge is £6,000. Keeping the contribution to £115,000 would have avoided it.
Paying the charge
The excess is added on top of your taxable income and taxed at your own rates: 20%, 40% or 45%, or the Scottish rates if you are a Scottish taxpayer. You must report it in the pension savings tax charges section of your Self Assessment return, even if your pension scheme pays some or all of it for you. No charge applies in the year you die, or if you retire because of serious ill health and take all your pension pots.
What this calculator does not cover
- Working out defined benefit input amounts. Use the figure on your scheme's pension savings statement;
- Scheme Pays elections and deadlines. Ask your scheme whether it will pay the charge;
- Lump sum death benefits and overseas schemes. These change threshold and adjusted income;
- Carry forward from before 2023/24. If a later year went over its allowance, older unused allowance may have covered it; the calculator assumes it did not, which may understate what you can carry forward;
- The 100% of earnings limit on tax relief and the lump sum allowances.
Planning your contributions
Large one-off contributions, bonuses paid into a pension and changes to defined benefit accrual are where annual allowance charges usually arise. Our private client tax team works out threshold and adjusted income, checks carry forward year by year and reports any charge on your return. For a wider view of your position, see our tax planning service or the income tax calculator.