Pension Annual Allowance Calculator 2026-27

The standard annual allowance is £60,000, raised from £40,000 in April 2023, and it covers everything paid into your pensions in a tax year from every source: your own contributions, your employer's, and the tax relief added on top. Go beyond it and a tax charge follows. Unused allowance from the previous three tax years can be carried forward, oldest year first, provided you belonged to a registered pension scheme in each of those years.

Carry-forward is easier to follow with figures attached. Someone who paid in £40k in 2023/24 left £20k unused, then £30k in 2024/25 left another £30k spare, then £40k in 2025/26 left a further £20k. That is £70k of unused allowance to bring into 2026/27, sitting on top of the current year's £60,000 for a total of £130k. It is what makes a bonus year, a business sale or an inheritance windfall manageable, and it softens the taper for anyone whose income swings about from year to year.

High earners lose part of the allowance. The taper cuts the £60,000 by £1 for every £2 of adjusted income above £260,000, down to a floor of £10,000 once adjusted income reaches £360,000. Adjusted income is your net income plus all pension contributions, yours and your employer's, so a £240k salary with a £20k employer contribution and nothing paid in personally arrives at exactly £260,000. Threshold income, which is broadly net income after deducting your own contributions paid through relief at source, must also exceed £200,000 for the taper to apply at all. Below that point the full £60,000 survives whatever the adjusted figure says.

The Money Purchase Annual Allowance of £10,000 bites once you have flexibly accessed taxable income from a defined contribution pension, whether through drawdown or an uncrystallised funds pension lump sum. From that moment it caps what you can pay into money purchase schemes, although it leaves defined benefit accrual alone, which keeps a separate £50,000 allowance under the alternative annual allowance rules. Taking a modest taxable withdrawal while still working and still contributing is the usual way people trigger it without meaning to.

Where contributions do run over, the annual allowance charge claws the relief back by adding the excess to your taxable income for the year, taxing it at your marginal rate, which is typically 40 or 45% for anyone in taper territory. Establishing which allowance applies before a large payment leaves your account is considerably easier than unwinding a charge afterwards, and that means working out threshold income and adjusted income rather than glancing at your salary.

Contributions attract relief at your marginal rate, so £100 in a pension costs a basic-rate taxpayer £80, a higher-rate taxpayer £60 and an additional-rate taxpayer £55, while employer contributions are deductible against corporation tax and carry no National Insurance or income tax. Separate from the annual limits, the Lifetime Allowance of £1,073,100 disappeared in April 2024. Its excess charges, 55% on an excess taken as a lump sum and 25% on an excess taken as income, had already stopped in April 2023. What replaced it caps tax-free cash rather than pension value, through a Lump Sum Allowance of £268,275 and a Lump Sum and Death Benefit Allowance of £1,073,100.