The pension annual allowance for 2025/26 is £60,000. This is the maximum total amount that can be paid into your pensions in a tax year, including your own contributions, tax relief and employer contributions.
If you earn less than £60,000, your annual allowance is limited to your total earnings. So if you earn £40,000, the most that can go into your pension is £40,000.
For high earners, the tapered annual allowance applies. If your adjusted income exceeds £260,000, your annual allowance reduces by £1 for every £2 above this threshold. The minimum tapered allowance is £10,000, which applies at adjusted income of £360,000 and above.
You can carry forward unused allowance from the previous three tax years. For example, if you only used £20,000 of your £60,000 allowance in each of the past three years, you would have £120,000 of unused allowance to carry forward, plus your current year's £60,000 — a total of £180,000.
Carry forward is particularly useful for higher earners who receive bonuses or have variable income. If you receive a large bonus one year, you could potentially contribute the entire amount to your pension using carry forward, saving 40% or even 60% in tax.
If you exceed the annual allowance, you pay an annual allowance charge. The excess is added to your income and taxed at your marginal rate. For a higher rate taxpayer, this means 40% tax on the excess.
The money purchase annual allowance (MPAA) of £10,000 applies if you have flexibly accessed your defined contribution pension. This significantly restricts future contributions, so think carefully before taking pension income.
Use our pension calculator to project your retirement pot with different contribution levels.