🇬🇧 United Kingdom · 4 min read · Published 2026-06-19 · Updated 2026-06-19

Written by Jordan Reeves · Reviewed by Naomi Hartley, CPA

Last fact-checked: 2026-06-19

The Pension Annual Allowance: £60,000, the Taper and the MPAA

Q: What is the pension annual allowance for 2025-26?

The standard annual allowance is £60,000 for the 2025-26 tax year. This is the most you can usually pay into pensions each year — across all your schemes and including tax relief and employer contributions — while still getting tax relief.

Q: How does the tapered annual allowance work?

If your adjusted income is over £260,000 and your threshold income is over £200,000, your annual allowance is reduced by £1 for every £2 of adjusted income above £260,000, down to a minimum of £10,000. The minimum is reached once adjusted income hits £360,000.

Q: What happens if I exceed the annual allowance?

You pay an annual allowance charge on the excess, taxed at your marginal income tax rate, which effectively claws back the tax relief. You may be able to use unused allowance from the previous three years through carry forward to avoid or reduce the charge.

The annual allowance is the most you can pay into pensions each year and still get tax relief — £60,000 for 2025-26. But two rules quietly shrink it: a taper that drags high earners down to £10,000, and the £10,000 money purchase annual allowance that kicks in the moment you flexibly access a pension.

60-SECOND ANSWER

£60,000 a year — but as little as £10,000 if you earn a lot or have accessed a pension.

The answer: the standard annual allowance is £60,000 for 2025-26, across all schemes, including employer and tax-relief amounts.
The taper: adjusted income over £260,000 cuts it by £1 for every £2, down to a £10,000 floor at £360,000.
The MPAA: flexibly accessing taxable pension income drops your DC allowance to £10,000 for good.

See how the taper hits high earners ↓

Where the AI summary above gets this wrong

"You can pay up to £60,000 a year into your pension."

True as a headline, but it's the number that's most often wrong for the people who care most:

It isn't £60,000 for high earners — the taper can cut it to £10,000, and AI summaries rarely mention the £260,000 adjusted-income trigger or the £200,000 threshold-income gateway.
It collapses to £10,000 once you've accessed a pension — the MPAA overrides the £60,000 figure entirely for defined contribution saving.

→ See the MPAA and carry-forward rules in chapter 3.

01 What the £60,000 allowance actually counts

The annual allowance for 2025-26 is £60,000, and it counts everything that goes into your pensions in the tax year — your own contributions, the tax relief added on top, and anything your employer pays. It applies across all your schemes combined, not per scheme, so two workplace pensions and a SIPP share the same £60,000 ceiling. For defined contribution pensions the figure is simply the total paid in; for defined benefit schemes it's the growth in the value of your promised benefit over the year, not the cash contributed.

Source: GOV.UK — Annual allowance

02 The tapered allowance for high earners

If you are a high earner, the £60,000 shrinks — and the mechanism is deliberately hard to trigger accidentally, which also makes it hard to understand.

Worked example — your tapered annual allowance

The taper applies only when both tests are met: adjusted income, broadly your total income plus pension contributions, exceeds £260,000; and threshold income, broadly your income excluding pension contributions, exceeds £200,000. Meeting one but not the other leaves the full allowance intact.

Adjusted income (£)

Your annual allowance

£40,000

Reduction from £60,000

£20,000

Where it applies, the allowance falls by £1 for every £2 of adjusted income above £260,000, down to a floor of £10,000 once adjusted income reaches £360,000.

The two-test structure is what makes salary sacrifice so valuable at these incomes. Because threshold income excludes employer contributions, sacrificing salary in exchange for an employer pension contribution can reduce threshold income below £200,000 and switch the taper off entirely — restoring the full £60,000 allowance. The saving from doing that dwarfs the ordinary tax relief.

It also means the calculation must be done in the right order and with the right definitions. "Income" here includes rental profits, dividends, savings interest and taxable gains, not just salary — so someone whose salary is well under the thresholds can still be tapered by a good year on investments, and will not discover it until the pension savings statement arrives.

Shows: the annual allowance after the high-income taper. Ignores: the separate £200,000 threshold-income test (this assumes it's met), carry forward, and the MPAA.

This is one snapshot. Your full plan needs to account for everything above. → See full app

If you're a high earner, your £60,000 can shrink. The taper applies when your adjusted income (broadly your total income plus your pension contributions) exceeds £260,000 and your threshold income (broadly your income excluding pension contributions) exceeds £200,000. Above £260,000 of adjusted income, the allowance falls by £1 for every £2, until it reaches a floor of £10,000 once adjusted income hits £360,000. The £200,000 threshold-income gate matters: if your threshold income is at or below £200,000 you keep the full allowance no matter how high your adjusted income looks on paper.

Source: GOV.UK — Who must pay the annual allowance tax charge

03 The MPAA, carry forward and the charge

Two more rules complete the picture. The money purchase annual allowance is £10,000: once you flexibly access taxable pension income — through drawdown or an uncrystallised lump sum — your allowance for further defined contribution saving permanently drops to £10,000. Going the other way, carry forward lets you use unused annual allowance from the previous three tax years, so you can sometimes pay in more than £60,000 in a single year without a charge. If you do exceed your allowance with no carry forward to cover it, you pay an annual allowance charge on the excess at your marginal rate.

The MPAA cannot be carried forward. If you've triggered it, the £10,000 limit applies every year regardless of unused allowance from earlier years — so taking taxable pension income while still working and contributing is a decision to make carefully.

The money purchase annual allowance is £10,000, and it replaces your normal allowance for defined-contribution pensions once you flexibly access taxable pension income. It is not a reduction applied for a year — it stands from the moment it is triggered, which is what makes the first flexible withdrawal a decision worth taking deliberately rather than discovering afterwards.

Jordan's view

The £60,000 headline is fine for most people and dangerously wrong for two groups: high earners caught by the taper, and anyone who's already dipped into a pension. I've watched people make a big year-end contribution assuming £60,000 of headroom, only to find their taper left £15,000 — and the rest landed them an allowance charge that wiped out the relief. Before any large contribution, check both your threshold and adjusted income, and check whether you've ever flexibly accessed a pension. Carry forward is the friend that quietly fixes most of these; the MPAA is the one that can't be undone.

— Jordan Reeves, founder, Talk Through Wealth

FAQ

What is the pension annual allowance for 2025-26?

£60,000 — the most you can usually pay into all your pensions in the year, including tax relief and employer contributions, while still getting tax relief.

How does the tapered annual allowance work?

If adjusted income is over £260,000 and threshold income is over £200,000, the allowance falls by £1 for every £2 above £260,000, to a £10,000 floor reached at £360,000.

What happens if I exceed the annual allowance?

You pay an annual allowance charge on the excess at your marginal rate, which claws back the tax relief. Carry forward of unused allowance from the prior three years may avoid or reduce it.

Sources

Regulator references

Annual allowance · GOV.UK · 2024The £60,000 standard allowance and how it is measured.Last verified: 2026-06-19
Who must pay the annual allowance tax charge · GOV.UK · 2024The taper thresholds, the MPAA and the annual allowance charge.Last verified: 2026-06-19

Changelog

2026-06-19 — initial publish (new format)

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Jordan Reeves

Founder of Talk Through Wealth. A software engineer for over a decade before turning to retirement planning, Jordan built the projection engine after watching family members get fragmented, country-by-country advice that never reconciled. He writes about retirement the way the engine computes it: month-by-month, lifetime-long, and skeptical of any rule of thumb that hasn't been run through the math.