Pension Annual Allowance Calculator 2026-27

The standard annual allowance is £60,000, meaning total pension contributions from all sources (employer, employee, and tax relief) in a tax year cannot exceed this without triggering a tax charge. Unused allowance can be carried forward from the previous three tax years, provided you were a member of a registered pension scheme in those years. The carry-forward is used oldest year first.

For high earners, the tapered annual allowance reduces the £60,000 limit by £1 for every £2 of adjusted income above £260,000, down to a minimum of £10,000. Adjusted income includes all earnings plus employer pension contributions. Threshold income (net income before pension contributions) must also exceed £200,000 for tapering to apply; if it doesn't, the full £60,000 allowance remains.

The Money Purchase Annual Allowance (MPAA) of £10,000 applies once you flexibly access taxable income from a defined contribution pension (e.g., drawdown or an uncrystallised funds pension lump sum). The MPAA only restricts money purchase contributions; defined benefit accrual retains a separate £50,000 allowance under the alternative annual allowance rules.

UK Pension Annual Allowance 2026/27. £60,000/year standard allowance (raised from £40,000 in April 2023). Tapered for high earners: threshold income £200,000+ AND adjusted income £260,000+ — annual allowance reduces £1 for every £2 over £260,000, to minimum £10,000 (at £360,000+ adjusted income). Money Purchase Annual Allowance (MPAA): £10,000/year for those who've flexibly accessed pension (e.g. drawn taxable income from DC pension). Carry-forward unused allowance: up to 3 previous tax years.

Lifetime Allowance — abolished April 2024. Pre-2024: LTA £1,073,100 limit on total pension benefits. Excess: 25% tax on lump sums, 55% on income. From April 2024: LTA abolished entirely. NEW Lump Sum Allowance: £268,275 — total 25% tax-free lump sum across all pensions in lifetime. NEW Lump Sum and Death Benefit Allowance: £1,073,100 — for death benefits and serious ill-health lump sums. NO limit on pension VALUE you can build — only on tax-free lump sums.

Annual Allowance taper — high earners. Threshold income: total income (salary, dividends, etc.) before pension contributions. Adjusted income: includes pension contributions made by you OR your employer. Sample: £240k salary + £20k employer pension contribution = adjusted £260k. £260k+ adjusted: AA tapers. Tax charge if exceeded: at marginal rate (40-45%) on excess. Carry-forward unused AA from previous 3 years: significantly reduces taper bite for sporadic earners.

Carry-forward strategy. Unused Annual Allowance from previous 3 tax years can be carried forward. Sample: £40k contributions 2023/24 ('used' £40k of £60k AA — £20k unused); £30k in 2024/25 (£30k unused); £40k in 2025/26 (£20k unused). 2026/27 can carry forward £70k unused + current £60k = £130k contribution allowance. Must have been pension scheme member during carry-forward years. Hugely valuable for: high earners with bonus years, business sale proceeds, inheritance windfall.

Pension contribution tax relief. Personal contributions: relief at marginal rate. £100 net pension costs £80 basic-rate; £60 higher-rate; £55 additional rate. Employer contributions: 100% tax-free both sides (CT deductible for company, no NI/income tax for employee). Salary sacrifice: gross-up effect — £100 salary sacrifice into pension = £138-£160 gross contribution after combined NI savings. Best UK pension hack: high-earning director sacrifices salary above NI threshold into pension — saves 13.8% employer NI + 8-12% employee NI + 40-45% income tax = 60-70% total effective relief.