Pension Annual Allowance 2025-26
The pension Annual Allowance is £60,000 for 2025-26. Here is everything you need to know about limits, carry forward, the taper, and how to maximise your contributions.
Annual Allowance 2025-26: Key Facts
| Parameter | 2025-26 |
|---|---|
| Standard Annual Allowance | £60,000 |
| Money Purchase Annual Allowance (MPAA) | £10,000 |
| Tapered Annual Allowance minimum | £10,000 |
| Threshold Income (triggers taper check) | £200,000 |
| Adjusted Income (taper applies above) | £260,000 |
| Carry forward years available | Up to 3 years |
| Lifetime Allowance | Abolished (April 2024) |
The Lifetime Allowance was permanently abolished in April 2024. There is now no upper limit on the total pension pot you can accumulate, only the annual limit on contributions that attract tax relief.
What Counts Towards the Annual Allowance?
The Annual Allowance covers all pension contributions across all your registered pension schemes:
- Employee contributions (including salary sacrifice)
- Employer contributions
- Third-party contributions (e.g., from a family member)
- For defined benefit schemes: the annual increase in pension value × 16 (the "pension input amount")
Contributions are measured in the "pension input period" which aligns with the tax year (6 April to 5 April).
Pension Tax Relief — How It Works
Tax relief effectively means the government contributes to your pension at your marginal income tax rate:
| Your Tax Rate | Your contribution | Tax relief added | Total into pension |
|---|---|---|---|
| Basic Rate (20%) | £800 | £200 | £1,000 |
| Higher Rate (40%) | £600 | £400 | £1,000 |
| Additional Rate (45%) | £550 | £450 | £1,000 |
Higher and Additional Rate taxpayers claim extra relief through Self Assessment (beyond the basic 20% added automatically at source by the pension provider).
Carry Forward: Maximising in a High-Income Year
Carry forward allows you to contribute more than the current year's Annual Allowance by using unused allowance from the three previous tax years.
Rules:
- You must have been a member of a registered pension scheme in the year(s) you carry forward from
- You must use the current year's allowance (£60,000) first
- Carry forward cannot exceed your earnings in the year of contribution
- Unused allowance from earlier years is used before more recent years
Carry Forward Example
An individual who made no pension contributions for 2022-23, 2023-24, and 2024-25 could make a single contribution of up to £240,000 in 2025-26:
- 2022-23 unused: £60,000
- 2023-24 unused: £60,000
- 2024-25 unused: £60,000
- 2025-26 current year: £60,000
- Total: £240,000 (subject to earnings being at least this amount)
This strategy is popular for directors, business owners, and those who have received a large one-off income (e.g., a business sale or bonus).
Tapered Annual Allowance
The Tapered Annual Allowance reduces the £60,000 limit for high earners. The taper only applies if both conditions are met:
- Threshold Income exceeds £200,000 (income excluding employer pension contributions)
- Adjusted Income exceeds £260,000 (income including employer pension contributions)
If both are exceeded, the allowance reduces by £1 for every £2 of Adjusted Income above £260,000, down to a minimum of £10,000 (reached when Adjusted Income is £360,000 or above).
| Adjusted Income | Tapered Annual Allowance |
|---|---|
| Up to £260,000 | £60,000 (no taper) |
| £280,000 | £50,000 |
| £300,000 | £40,000 |
| £320,000 | £30,000 |
| £340,000 | £20,000 |
| £360,000+ | £10,000 (minimum) |
Pension and the £100,000 Personal Allowance Trap
If your income is between £100,000 and £125,140, you face an effective 60% marginal tax rate due to the Personal Allowance taper. Pension contributions are one of the most powerful tools here: they reduce your "adjusted net income" which restores your Personal Allowance.
Example: On £110,000 income, making a £10,000 pension contribution reduces your adjusted income to £100,000 — fully restoring the £5,000 of Personal Allowance you would otherwise lose. That £10,000 contribution effectively saves you 40% income tax + 40% on the restored allowance = significant relief.
Use our pension tax calculator to model the exact saving.
Money Purchase Annual Allowance (MPAA)
Once you flexibly access your pension (e.g., take an income from a drawdown arrangement), the Money Purchase Annual Allowance applies: you can only contribute £10,000 per year to defined contribution (money purchase) schemes, not £60,000. This prevents recycling pension funds.
Frequently Asked Questions
What is the pension annual allowance for 2025-26?
£60,000 — or 100% of your earnings if lower. This covers total contributions from all sources (employee, employer, third party) across all registered pension schemes. Exceeding it triggers an Annual Allowance Charge at your marginal tax rate.
Can I carry forward unused pension allowance?
Yes — unused allowance from the three previous tax years can be carried forward, provided you were a pension scheme member in those years. The current year's £60,000 must be used first. This can allow contributions of up to £240,000 in a single year.
What is the tapered annual allowance?
If your adjusted income (including employer contributions) exceeds £260,000, your Annual Allowance reduces by £1 for every £2 above that threshold, down to a minimum of £10,000. This only applies when threshold income (excluding employer contributions) also exceeds £200,000.
What happens if I exceed the annual allowance?
The excess over your Annual Allowance is added to your taxable income and charged at your marginal tax rate (20%, 40%, or 45%). Report it in your Self Assessment return. The pension scheme can pay the charge via "Scheme Pays" in exchange for a reduced pension benefit.