What Is the Pension Annual Allowance? (UK 2025/26)

The pension annual allowance is the maximum total value of pension contributions that can be made in a single tax year while still benefiting from tax relief. For 2025/26, the standard annual allowance is £60,000. This includes everything: your personal contributions, your employer's contributions, any third-party contributions, and the basic-rate tax relief added by HMRC.

Exceeding the Allowance

If total contributions exceed the annual allowance, you face a tax charge on the excess. The charge is calculated at your highest marginal rate of income tax. You can either pay the charge yourself via self-assessment or, if the charge exceeds £2,000, ask your pension scheme to pay it on your behalf (this is known as "scheme pays" and reduces your future pension benefits accordingly).

Carry Forward

If you did not use your full annual allowance in any of the previous three tax years, you can carry the unused amount forward. This means you could potentially contribute well over £60,000 in a single year without incurring a charge, provided you had unused allowance from 2022/23, 2023/24, or 2024/25.

Tapered Annual Allowance for High Earners

If your threshold income exceeds £200,000 and your adjusted income exceeds £260,000, the annual allowance is reduced by £1 for every £2 of adjusted income above £260,000. The minimum tapered allowance is £10,000. This means anyone with adjusted income of £360,000 or more can only contribute £10,000 per year.

Money Purchase Annual Allowance (MPAA)

If you have already flexibly accessed a defined contribution pension (for example, by taking income drawdown), your annual allowance for further defined contribution contributions drops to just £10,000. This restriction applies permanently once triggered.