UK Pension Annual Allowance 2026/27 — £60k Limit, Taper, Carry-Forward
Reviewed by Alex Morgan · Updated April 2026 · UK tax year 2026/27 (6 April 2026 → 5 April 2027)
The three Annual Allowance regimes
| Regime | 2026/27 limit | Who it applies to | Carry-forward? |
|---|---|---|---|
| Standard Annual Allowance | £60,000 | Most savers | Yes — 3 years |
| Tapered Annual Allowance | £60,000 → £10,000 | Adjusted income > £260k AND threshold income > £200k | Yes — but unused taper years contribute their tapered AA |
| Money Purchase AA (MPAA) | £10,000 | Anyone who has flexibly accessed a DC pension | No — for DC contributions |
What counts toward the allowance
The Annual Allowance covers all "pension input" in a tax year, not just your contributions. For a defined contribution pension this is straightforward: gross employee contributions + employer contributions + tax relief = total. For defined benefit (DB) schemes the calculation is the "pension input amount" — broadly the increase in capital value of your DB benefits over the year, multiplied by 16.
DB members in NHS, teachers', civil service, fire, police and similar career-average schemes can blow through £60k surprisingly easily after a promotion. Each year, the McCloud remedy and the 2022/23 inflation spike pushed thousands of senior consultants and head teachers into Annual Allowance Charge territory. If you're a high-earning DB member, ask your pension scheme for your "pension input amount" each year — don't guess.
The taper — how high earners lose allowance
Two income tests determine whether you're caught by the taper:
- Threshold income > £200,000 — broadly your taxable income excluding employer pension contributions and post-2016 salary sacrifice into a pension.
- Adjusted income > £260,000 — your threshold income PLUS the value of your pension input (employer DC contributions, the DB pension input amount).
You only get tapered if you breach BOTH thresholds. The taper formula:
Tapered AA = max(£10,000, £60,000 − ((adjusted income − £260,000) ÷ 2))
Example: adjusted income £300,000 → AA = £60,000 − ((£300,000 − £260,000) ÷ 2) = £60,000 − £20,000 = £40,000.
Example: adjusted income £400,000 → AA hits the £10,000 floor (anyone above £360,000 adjusted income).
Carry-forward — the under-used lever
You can use unused AA from the previous three tax years. To qualify you must have been a member of a UK-registered pension scheme in each of those years (no contribution required — just membership). You must use the current year's AA first, then go back to the oldest year. Theoretical maximum in 2026/27 with full carry-forward from clean years:
| Year | Standard AA | Cumulative |
|---|---|---|
| 2023/24 | £60,000 | £60,000 |
| 2024/25 | £60,000 | £120,000 |
| 2025/26 | £60,000 | £180,000 |
| 2026/27 (current) | £60,000 | £240,000 |
In practice the cap is your relevant UK earnings — you only get tax relief on contributions up to 100% of what you earned in the tax year (with a £3,600 minimum for non-earners). So a £100k earner can use carry- forward to make a single £100k contribution if they have unused AA from prior years, but cannot go higher than their earnings.
Tax relief — why pension contributions are so powerful
Personal contributions get tax relief at your marginal rate. £8,000 of net pay becomes £10,000 in your pension (basic-rate relief added at source). Higher-rate taxpayers claim the extra 20% via Self Assessment or PAYE coding adjustment. Additional-rate taxpayers claim the extra 25%.
- Basic-rate (20%): £80 net → £100 in pension
- Higher-rate (40%): £60 net → £100 in pension (£20 reclaimed via SA)
- Additional-rate (45%): £55 net → £100 in pension (£25 reclaimed)
- 60% tax trap (£100k–£125,140): £40 net → £100 in pension — best £-for-£ relief in the UK system
- Scotland additional-rate (48%): £52 net → £100 in pension
If you exceed the allowance: the Annual Allowance Charge
Going over your AA doesn't unwind contributions — instead, HMRC charges your marginal rate on the excess. Report on your Self Assessment under "Additional information / Pension savings tax charges."
- Pay out of pocket — straightforward but expensive if the excess is large.
- Scheme Pays mandatory — if charge exceeds £2,000 AND your contributions to the scheme exceeded its AA, your pension provider pays HMRC and reduces your future pension. Notify by 31 July.
- Scheme Pays voluntary — for charges below the mandatory threshold, some schemes still allow this; depends on scheme rules.
The Lifetime Allowance — abolished, but watch the cap
The Lifetime Allowance was abolished from 6 April 2024. There's no longer a £1.073m cap on total pension value. However, two new caps replaced it: the Lump Sum Allowance (£268,275) limits the cumulative tax-free cash you can take across all pensions, and the Lump Sum and Death Benefit Allowance (£1,073,100) limits tax-free lump sums on death pre-75. Most savers will never hit these, but it's worth knowing the framework isn't quite as clean as "no limit any more."
Pair this with
- → UK 60% tax trap 2026/27 — pension contributions are the #1 way out
- → UK salary sacrifice 2026/27 — get employer NI savings on top
- → UK Self Assessment 2026/27 — where higher/additional-rate relief is reclaimed
- → UK State Pension 2026/27 — the foundation layer
- → UK pension at work — 15 scenarios