Pension Annual Allowance 2026/27 — £60,000 Limit, Taper & MPAA

The annual allowance is the cap on total pension contributions — yours, your employer's and anyone else's — that can be made in a tax year without triggering an extra tax charge. For 2026/27 the standard limit is £60,000, unchanged since 2023/24. High earners face a tapered allowance that can shrink the limit to £10,000, and anyone who has flexibly accessed their pension is confined to the Money Purchase Annual Allowance (MPAA) of £10,000. Check your own allowance position with the Annual Allowance Calculator→.

This guide explains how the allowance is measured, when the taper bites, how the MPAA works, the carry-forward rules that can multiply your usable allowance, and the tax charge that applies to any excess.

The Standard Annual Allowance

The allowance measures the total input to your pension, not just what you personally pay. A £40,000 employer contribution plus a £25,000 personal contribution totals £65,000 and breaches the £60,000 limit by £5,000. For defined benefit schemes the input is the pension input amount — the increase in your accrued pension capitalised at 16 times the annual benefit growth — not the actual cash paid, which is why senior executives in final salary schemes can breach the allowance with no cash changing hands at all.

The Tapered Annual Allowance

The taper only applies if both conditions are met. Threshold income and adjusted income are statutory calculations with specific additions and exclusions; they cannot be reproduced safely by simply subtracting personal contributions or adding employer contributions. A director earning £300,000 of adjusted income has an allowance of £60,000 − (£40,000 ÷ 2) = £40,000. Someone at £360,000 adjusted income hits the £10,000 floor. Compute both measures using HMRC's definitions before funding a pension, especially where salary sacrifice is involved.

The Money Purchase Annual Allowance

Once you take flexible access — drawing income from a flexi-access drawdown fund, or taking an uncrystallised funds pension lump sum (UFPLS) — the MPAA of £10,000 caps all future money purchase contributions. It is a lifetime restriction: even if you never draw again, the £10,000 limit continues. Triggering it accidentally is a known trap — a small UFPLS withdrawal "for tax efficiency" locks your future contribution capacity down permanently. Defined benefit accrual is unaffected, and the £10,000 does not carry forward. Anyone taking a 25% tax-free lump sum alone (without income) does not trigger the MPAA, because that is not flexible access.

Carry Forward

Unused annual allowance from the previous three tax years can be carried forward, so 2026/27 contributions can draw on unused 2023/24, 2024/25 and 2025/26 allowance — each of those years had a £60,000 standard limit, though the taper and MPAA apply in the years being carried from. The rules are: use the current year's allowance first, then the earliest year; you must have been a member of a registered pension scheme in the year being carried from; and the MPAA blocks carry forward into money purchase schemes once triggered. A first-time contributor with no prior membership cannot carry forward at all.

Worked Examples

Example 1: The £70,000 funding. Daniel has earned £80,000 all year. His employer pays £10,000 and he pays £50,000 personally — £60,000 total, inside the limit. In 2025/26 he contributed only £20,000, so he has £40,000 of unused allowance to carry into 2026/27, letting him contribute up to £100,000 this year (£60,000 current plus £40,000 carried).

Example 2: The taper. Fatima has threshold income of £230,000 and adjusted income of £290,000. Her tapered allowance is £60,000 − (£30,000 ÷ 2) = £45,000. She contributes £50,000, breaching by £5,000, and the excess is taxed at her marginal rate — 45%, so the charge is £2,250, payable through Self Assessment. The scheme pays the charge from the pot if she elects scheme pays; otherwise she funds it from income.

The 100% of Earnings Limit

Even within a full £60,000 allowance, personal contributions cannot exceed 100% of your UK relevant earnings for the year — salary, self-employed profits, bonuses and other taxable employment income. A student with £15,000 of earnings cannot fund £60,000 personally, no matter how much unused allowance they carry. Relevant earnings exclude investment income, dividends and rental income, so a retired person with no earned income cannot make relief-eligible personal contributions at all (though employer contributions to an occupational scheme remain possible). Carry forward can stretch the £60,000 annual cap but never the 100% earnings limit, because that restriction is applied to the current year's contributions themselves. Non-earners can still contribute up to £3,600 gross a year under the special rules, which effectively acts as a mini-allowance for spouses, children and the retired.

Salary Sacrifice and the Allowance

Salary sacrifice contributions still count toward the annual allowance because the money is going into the pension. For the taper tests, post-8 July 2015 salary-sacrifice arrangements are included in the threshold-income rules, and adjusted income has its own statutory additions. Do not assume that sacrificing salary restores the full £60,000 allowance: use HMRC's calculation and check the anti-avoidance rules for arrangements intended to reduce the income tests. Any National Insurance or tax saving also depends on the current rates and the employer's scheme, so this guide does not treat a fixed saving percentage as universal.

Scheme Pays

If your annual allowance charge is over £2,000, scheme pays may allow the pension scheme to pay it from your pot instead of you funding it from income. Mandatory scheme pays has additional conditions, including the relevant pension-input and allowance tests; voluntary scheme pays depends on the scheme's rules. The member's election deadline is generally 31 July following the tax year end, but confirm the exact deadline and process with the scheme. The scheme reduces your future benefits accordingly, and the charge still needs to be reported correctly on Self Assessment where required.

Check the pension input period, not just the payment date

The annual allowance calculation uses the pension input amount for the relevant input period. For a defined-contribution scheme, the amount is normally the contributions credited for the tax year, but provider statements and payroll timing still need to be checked. For a defined-benefit scheme, the input is based on the increase in the promised benefit under the statutory calculation, not simply the employee contributions shown on a payslip. Ask the scheme for its pension savings statement where the position is close to the limit.

Employer contributions can arrive after a bonus, salary review or payroll correction. Keep the date credited to the pension and the tax year used by the scheme. A personal spreadsheet that lists only bank payment dates may not match the provider's annual statement. If two schemes use different statement formats, keep both and ask the administrators to confirm the input amount rather than adding headline contribution figures blindly.

Taper calculations need complete income data

The taper is not a second annual-allowance calculator that can be solved from salary alone. Gather employment income, taxable benefits, bonuses, pension contributions, salary sacrifice, self-employment income and other items required by HMRC's threshold-income and adjusted-income definitions. Check the result after the tax year closes if a bonus, share award or employer contribution was uncertain. A provisional estimate can guide a contribution decision, but it is not evidence of the final allowance.

Where income varies, model a lower, central and higher case before making a large contribution. Keep the assumptions visible and update the calculation when the employer confirms the final pension input. If a contribution would breach a tapered allowance, compare the tax charge, carry-forward position and scheme-pays option before asking the provider to process it. Do not rely on a generic “high earner” percentage or on the amount another employee can contribute.

MPAA and later contributions

The MPAA is separate from the wider annual allowance and applies to future money-purchase contributions after a triggering flexible-access event. Keep the date and type of the event: taking only a pension commencement lump sum is different from taking taxable drawdown income or an UFPLS. Tell every active pension provider if a trigger occurs, because a later employer contribution can be tested against the reduced limit even when the payroll arrangement has not changed.

The MPAA does not turn every pension input into a £10,000 total allowance. Defined-benefit accrual and the alternative annual-allowance calculation can still require review, while carry forward cannot be used to increase the MPAA for money-purchase contributions. Because the interaction is easy to misread, obtain the provider statement and use the HMRC rules before taking a small withdrawal for convenience.

Scheme pays and evidence

Scheme pays is not an automatic refund or a free way to exceed the allowance. Confirm whether mandatory scheme pays applies, whether the charge meets the relevant threshold, when the election must be made and how the reduction in future benefits will be calculated. Voluntary scheme pays is controlled by the scheme's own rules. Keep the scheme pays election, notice, annual-allowance statement, Self Assessment entry and provider confirmation together.

At the end of the tax year, reconcile the total inputs, the allowance used, carry forward from each year, any MPAA event and the final tax charge. If the scheme or HMRC later changes a figure, update the return and records rather than relying on the original calculator screenshot. This is particularly important for high earners, senior DB members, people with several employers and anyone who changed pension arrangements during the year.

Managing Your Allowance

Frequently Asked Questions

Work out exactly how much you can fund this year with the Annual Allowance Calculator→, then read the Pension Carry Forward guide for the full rules and the Pension Tax-Free Cash guide before taking anything out.

Official sources

• GOV.UK: Tax on your private pension — annual allowance
• GOV.UK: Pension schemes rates
• HMRC: Tapered annual allowance
• HMRC: Pension scheme pays reporting information and notice deadlines