Annual Allowance

What is the annual allowance?

The annual allowance is the most you can contribute to pensions in a tax year while still receiving tax relief. It’s currently £60,000, or 100% of your earnings—whichever is lower.

This limit covers everything going into your pensions: your contributions, employer contributions, and tax relief added by the government.

What if you go over?

Contributions above the annual allowance trigger a tax charge. You don’t lose the money, but the tax benefit disappears—and you may owe extra tax on top.

For most people earning normal salaries, £60,000 is more than enough. It mainly affects high earners or those making large one-off contributions.

Can you use unused allowance from previous years?

Yes. If you didn’t use your full allowance in the past three tax years, you can “carry forward” the unused amount. This lets you make a larger contribution now without triggering a tax charge.

You must have been a member of a pension scheme in those years to use carry forward.

Is the allowance lower for high earners?

Yes. If you earn over £260,000 (including pension contributions), your annual allowance is reduced. It can drop as low as £10,000 for very high earners. This is called the tapered annual allowance.

Key points

• £60,000 per year maximum – or 100% of earnings if lower
• Includes employer contributions – not just yours
• Unused allowance carries forward 3 years
• Reduced for very high earners – tapered down to £10,000