Annual Allowance and Tapered Allowance Explained

Everything you need to know about the £60,000 annual allowance and how high earners are affected by tapering in the UK pension system for 2025/26.

What Is the Annual Allowance?

The annual allowance is the most you can save into pensions each tax year while still receiving tax relief. For 2025/26, the standard annual allowance is £60,000.

The Tapered Annual Allowance

• Threshold income: £200,000 — if your income is below this, tapering doesn't apply.
• Adjusted income: £260,000 — tapering begins when adjusted income exceeds this.
• Reduction: £1 for every £2 of adjusted income above £260,000.
• Minimum allowance: £10,000 (reached at adjusted income of £360,000).

Carry Forward Rules

You can carry forward unused annual allowance from the previous three tax years, potentially allowing contributions well above £60,000 in a single year.

Exceeding the Allowance

If you exceed your annual allowance, you'll face an annual allowance charge at your marginal income tax rate on the excess amount.