Question 1

What is the pension annual allowance for 2025/26?

Accepted Answer

The standard annual allowance for the 2025/26 tax year is £60,000. This is the total amount you and your employer can contribute to your pensions in a tax year while still receiving tax relief. It applies across all your pension schemes combined, not per scheme.

Question 2

What is the tapered annual allowance?

Accepted Answer

The tapered annual allowance reduces the £60,000 limit for high earners. It only applies if both your threshold income is over £200,000 AND your adjusted income is over £260,000. When it applies, the £60,000 allowance is reduced by £1 for every £2 of adjusted income above £260,000, down to a minimum floor of £10,000 (reached at £360,000 of adjusted income).

Question 3

What's the difference between threshold income and adjusted income?

Accepted Answer

Threshold income is your total taxable income MINUS personal pension contributions. Adjusted income is your total taxable income PLUS employer pension contributions. The taper only applies if both of these are above their respective limits (£200,000 and £260,000), which is why the maths can be surprising — contributing more personally can lower your threshold income and avoid the taper entirely.

Question 4

Can I carry forward unused annual allowance from previous years?

Accepted Answer

Yes. You can carry forward unused annual allowance from the previous three tax years if you were a member of a UK-registered pension scheme in each of those years. You must use the current year's allowance first, then the oldest year's unused allowance, then work forward. Carry forward can't rescue you from the tapered allowance floor in prior years — if you were tapered then, the reduced figure is what's available to carry forward.

Question 5

What happens if I exceed the annual allowance?

Accepted Answer

Contributions above your total available allowance (current year plus carry forward) trigger an annual allowance charge. The charge is calculated at your marginal rate of income tax — 40% for higher rate and 45% for additional rate taxpayers — and is paid via self-assessment. In some cases, your pension scheme can pay the charge on your behalf under the 'scheme pays' rules.

How much can you pay in before the taxman joins in?