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Summary
The annual allowance is the maximum amount of pension contributions that receive tax relief each year. For most people, this is £60,000. High earners (adjusted income over £260,000) face a tapered allowance that can reduce to as low as £10,000. The calculator determines your available allowance and whether you have unused allowance from the previous three years that can be carried forward.
How it works
Standard annual allowance
The annual allowance is £60,000 from the 2023-24 tax year onwards. This covers all pension contributions: employee, employer, and any personal contributions combined.
If total contributions exceed the allowance, you face a tax charge on the excess at your marginal income tax rate (effectively removing the tax relief).
Tapered annual allowance (high earners)
For individuals with both:
- Threshold income over £200,000, AND
- Adjusted income over £260,000
The annual allowance is reduced by £1 for every £2 of adjusted income above £260,000. The minimum tapered allowance is £10,000 (reached at adjusted income of £360,000+).
Threshold income = total income minus personal pension contributions Adjusted income = threshold income plus employer pension contributions
Carry forward
If you didn’t use your full annual allowance in any of the previous three tax years, you can carry the unused amount forward. This allows a larger contribution in the current year without a tax charge. You must have been a member of a registered pension scheme in each year you wish to carry forward.
Money Purchase Annual Allowance (MPAA)
If you have flexibly accessed your defined contribution pension (e.g., taken a lump sum beyond the tax-free amount), your annual allowance for future contributions drops to £10,000. This cannot be supplemented by carry forward.
Worked example
Adjusted income: £290,000, threshold income: £250,000
- Both thresholds exceeded (£200k and £260k)
- Taper reduction: (£290,000 - £260,000) / 2 = £15,000
- Tapered allowance: £60,000 - £15,000 = £45,000
- Maximum tax-relieved contribution: £45,000
If employer contributes £20,000, the employee can contribute up to £25,000 before triggering a tax charge.
Carry forward example:
- 2022-23 allowance: £40,000, used £15,000 → £25,000 unused
- 2023-24 allowance: £60,000, used £30,000 → £30,000 unused
- 2024-25 allowance: £60,000, used £20,000 → £40,000 unused
- 2025-26 allowance: £60,000
- Available in 2025-26: £60,000 + £25,000 + £30,000 + £40,000 = £155,000
Inputs explained
- Total income — all taxable income from all sources
- Employer pension contributions — what your employer pays into your pension
- Personal pension contributions — what you contribute
- Previous year contributions — amounts contributed in each of the last 3 years
- Flexible access — whether you have triggered the MPAA
Outputs explained
- Available annual allowance — your current year limit
- Taper applied — whether and how much your allowance is reduced
- Carry forward available — unused allowance from previous years
- Total available — current year + carry forward
- Excess — amount over the allowance (if any) and the estimated tax charge
Assumptions & limitations
- The taper thresholds (£200,000 / £260,000) were set from 2023-24. Earlier years had lower thresholds.
- Carry forward is only available if you were a member of a registered pension scheme in each relevant year.
- The MPAA is triggered by flexible access to defined contribution pensions. Taking a tax-free lump sum alone (without flexible income) does not trigger it.
- Defined benefit pensions use a different calculation (pension input amount = increase in annual pension x 16 + lump sum increase).