The Pension Annual Allowance, and How Carry Forward Stretches It
There is a ceiling on how much can go into your pensions with tax benefits each year. In 2026/27 it is £60,000, and it counts everything: your money, the tax relief added to it, and your employer's contributions too. Most people never get near it. But the allowance has a rule that reaches backwards as well, and someone who has saved little since 2023 could shelter up to £240,000 this year. Here is the whole picture, including the two rules that quietly shrink the allowance for some people.
What counts towards the £60,000
For a defined contribution pension (workplace pots, SIPPs, personal pensions), the allowance counts the gross amount going in during the tax year (source: GOV.UK / MoneyHelper, August 2026):
- Your own contributions, including the basic-rate tax relief added on top. Pay in £8,000 and £10,000 counts against the allowance.
- Employer contributions, including anything paid through salary sacrifice (sacrificed pay becomes an employer contribution).
- Contributions to every pension you have, added together. The allowance is per person, not per pot.
Defined benefit schemes (final salary, career average) work differently. What counts is the growth in the value of your promised pension over the year, calculated by the scheme. If you are in one and contributing heavily elsewhere, ask the scheme for your "pension input amount".
Two caps, not one
The annual allowance is separate from the tax relief limit, and people mix them up constantly. Relief on your own contributions is capped at 100% of your UK earnings this year (£3,600 gross if you earn less than that). The £60,000 allowance sits on top and also counts employer money. Earn £30,000 and your personal contributions are capped by your earnings long before the annual allowance matters, but your employer could still contribute above that.
Carry forward: reaching back three years
If you did not use your full allowance in the last three tax years, you can use what is left of it now. The allowance has been £60,000 since 2023/24, so in 2026/27 the maximum available is this year's £60,000 plus anything unused from 2023/24, 2024/25 and 2025/26.
| Tax year | Allowance | Example: you contributed | Unused |
|---|---|---|---|
| 2023/24 | £60,000 | £20,000 | £40,000 |
| 2024/25 | £60,000 | £30,000 | £30,000 |
| 2025/26 | £60,000 | £40,000 | £20,000 |
| 2026/27 (this year) | £60,000 | £0 so far | £60,000 |
In this example the person could put in up to £150,000 this year: their £60,000 current allowance plus £90,000 carried forward. Contributions count against the current year first, then against the oldest carried-forward year, working forwards. Unused allowance from a year drops off after three years, oldest first, so it pays to use the oldest while it is still alive.
The three conditions
- You were a pension scheme member in those years. Any UK-registered scheme counts, even one you paid nothing into, even an old dormant workplace pot. What does not work is having had no pension at all in the year you want to carry forward from.
- The earnings cap still applies to personal contributions. Tax relief on your own contributions is limited to 100% of this year's UK earnings. To use a big carry forward amount personally, you need earnings to match this year. Employer contributions are not capped by your earnings, which is why company owners often use carry forward through their business.
- The MPAA blocks it. If you have flexibly accessed a pension and triggered the £10,000 Money Purchase Annual Allowance (more on that below), you cannot use carry forward for defined contribution saving at all.
Rob gets a £40,000 bonus and has £70,000 of unused allowance from the last three years, plus this year's £60,000 still free. He earns £90,000.
He can pay the whole bonus into his pension and more besides, because his contributions stay within both his available allowance (£130,000) and his earnings (£90,000). At higher-rate tax the relief turns that £40,000 into a much bigger boost to his pot, and if it is paid by salary sacrifice he saves National Insurance too.
No paperwork needed (usually)
There is no form to claim carry forward and nothing to tell HMRC in advance. You contribute, keep your own record of the calculation, and report through Self Assessment only if you exceed the allowance. Your pension providers can give you contribution histories for the calculation.
When carry forward earns its keep
- A big bonus or redundancy payment. Sheltering it in a pension can rescue tax relief at your highest rate, and salary-sacrificed bonuses save National Insurance too.
- Selling a business or property. Proceeds cannot go in directly beyond your earnings, but a strong earnings year plus carry forward can move a lot.
- Company owners. Employer contributions from your limited company can use carry forward without the personal earnings cap, subject to the usual "wholly and exclusively" test for the business.
- Catching up after lean years. Career breaks and self-employment dips leave unused allowance behind, and carry forward gives you three years to recover it.
See what a lump sum could become
Add a one-off boost to your pot in the free calculator and watch what compounding does with it by retirement.
Try the calculator →The taper: how high earners lose most of it
Earn enough and the allowance shrinks. The taper applies only if you cross both of these lines (source: GOV.UK, 2026/27):
- Threshold income over £200,000. Roughly, your total taxable income minus your own pension contributions.
- Adjusted income over £260,000. Roughly, your total income plus employer pension contributions.
Cross both and you lose £1 of allowance for every £2 of adjusted income above £260,000, until the allowance hits its floor of £10,000 at £360,000 of adjusted income.
| Adjusted income | Annual allowance 2026/27 |
|---|---|
| £260,000 or below | £60,000 |
| £280,000 | £50,000 |
| £310,000 | £35,000 |
| £360,000 and above | £10,000 |
The threshold income test matters because it gives some people an escape hatch. A large personal pension contribution can pull threshold income back under £200,000 and switch the taper off entirely. That is a calculation worth paying an adviser to check rather than guessing.
One thing to watch if you are carrying forward from a tapered year: you carry forward the unused part of the reduced allowance for that year, not the full £60,000.
The MPAA: the £10,000 trap after you have taken money out
Flexibly take taxable money out of a defined contribution pension (not just the 25% tax-free lump sum) and you usually trigger the Money Purchase Annual Allowance. From that point on, only £10,000 a year can go into defined contribution pensions, and carry forward no longer works for them. It is permanent, and it catches people who dip into a pension at 55 while still working and paying in. If you might want to keep contributing, think hard before taking taxable withdrawals.
What happens if you go over
Nothing is blocked and nobody stops the payment. Instead, the excess triggers an annual allowance charge that claws back the tax relief, at your marginal income tax rate, reported through Self Assessment.
Priya's contributions total £70,000 this year against a £60,000 allowance, with no unused allowance to carry forward. The £10,000 excess is added to her income and taxed at her marginal rate. As a 40% taxpayer she owes a £4,000 charge.
If the charge is over £2,000 and the contributions to one scheme exceeded the standard allowance, she can usually ask that scheme to pay it from her pot instead of finding the cash herself. This is called Scheme Pays.
Before any charge applies, though, check carry forward. Unused allowance from the three previous tax years can soak up the excess, and most one-off breaches disappear once it is counted.
Worth double-checking
Two groups need care: very high earners, whose allowance may have been tapered below £60,000 in earlier years, and anyone in a defined benefit scheme, where the "contribution" figure is a calculated value your scheme must confirm. For sums this size, an hour of regulated advice is cheap insurance.
Common questions
What is the pension annual allowance for 2026/27?
It is £60,000. That covers your own contributions plus the basic-rate tax relief added to them, plus anything your employer pays in, across every pension you hold. It has been £60,000 since the 2023/24 tax year.
How much can I carry forward?
This year's £60,000 plus whatever you did not use of the £60,000 allowance in 2023/24, 2024/25 and 2025/26, so up to £240,000 in total. Contributions count against the current year first, then the oldest carried-forward year, working forwards. Unused allowance older than three years is lost.
Can I carry forward if I do not have the earnings?
For your own contributions, tax relief is capped at 100% of this year's UK earnings, so you need matching earnings to use a large carry forward personally. Employer contributions, including from your own limited company, are not limited by your earnings, which is why company owners often use carry forward through the business.
What is the tapered annual allowance?
If your threshold income is over £200,000 and your adjusted income is over £260,000, you lose £1 of allowance for every £2 of adjusted income above £260,000, down to a floor of £10,000 at £360,000 of adjusted income. You have to cross both lines for the taper to apply.
What happens if I go over the annual allowance?
Nothing blocks the payment. The excess is added to your income and taxed at your marginal rate through Self Assessment, which claws back the tax relief. Check carry forward first, because unused allowance from the previous three years usually soaks up a one-off breach. If the charge is over £2,000 you can often ask the scheme to pay it from your pot, which is called Scheme Pays.
Do I need to tell HMRC I am using carry forward?
There is no form to claim it and nothing to tell HMRC in advance. You contribute, keep your own record of the calculation, and only report through Self Assessment if you exceed your available allowance. Your pension providers can supply the contribution histories you need.
Sources
- Annual allowance £60,000 (2023/24 onwards) and carry forward rules: GOV.UK / HMRC Pensions Tax Manual; MoneyHelper.
- Tapered annual allowance thresholds (£200,000 threshold income, £260,000 adjusted income, £10,000 floor): GOV.UK, 2026/27.
- Money Purchase Annual Allowance £10,000 and the triggers for it: GOV.UK.
- Earnings limit for tax relief (100% of relevant UK earnings, £3,600 gross floor) and Scheme Pays (£2,000 threshold): GOV.UK. Figures correct as of August 2026.
The Pension Sprout letter
One plain-English pension tip each month, plus what has changed in the rules. No spam, unsubscribe any time.
Sent via MailerLite. See our privacy policy.
This article is for general information only and does not constitute financial advice. Annual allowance and carry forward calculations depend on your personal contribution history and any taper in earlier years; figures relate to the 2026/27 tax year and are correct as of August 2026. For advice tailored to you, speak to a financial adviser regulated by the Financial Conduct Authority (FCA), or get free guidance from MoneyHelper.