Your yearly pension contribution limit, taper rules, carry forward, and how to avoid the tax charge.
The pension annual allowance is the maximum amount you (and your employer on your behalf) can contribute to all your defined contribution pensions in a single tax year without facing an annual allowance tax charge. For the 2026/27 tax year, the standard limit remains £60,000.
This figure is per individual, not per pension scheme. If you have multiple pension pots — say, a workplace scheme and a personal SIPP — their combined contributions count towards the same annual allowance.
If your adjusted income exceeds £260,000, your annual allowance is tapered down. For every £2 of adjusted income above £260,000, your annual allowance reduces by £1, down to a minimum of £10,000.
Adjusted income means your total taxable income plus any employer pension contributions added back. The taper only applies once your threshold income also exceeds £200,000.
Example for 2026/27:
If your adjusted income hits £360,000 or more, you're left with the £10,000 minimum allowance.
Any unused annual allowance from the previous three tax years can be carried forward. This is particularly useful if you receive a large bonus or sell a business and want to make a one-off pension contribution.
Rules to remember:
If you've started drawing taxable income from a defined contribution pension under flexible access rules, your annual allowance for future contributions drops to £10,000. This is known as the Money Purchase Annual Allowance.
The MPAA only applies to defined contribution schemes. It does not affect final salary or other defined benefit pensions. Carry forward is not available once the MPAA applies to you.
If you exceed your annual allowance (including any tapered or MPAA reduction), the excess is subject to an annual allowance tax charge. This charge is added to your taxable income for the year and taxed at your marginal rate — so a higher-rate taxpayer pays 40% on the excess, and a top-rate taxpayer pays 45%.
You can choose to have the charge paid from the pension scheme itself via scheme pays, but the pension provider must agree, or the charge must be above £2,000 and your total annual allowance charge across all schemes must exceed £2,000.
Pension providers must report any contributions above your annual allowance to HMRC automatically, so it's far better to check before rather than after the fact.