Pension Annual Allowance: How Much Can You Pay In for 2026/27?

The pension annual allowance is the maximum total amount that can be contributed to all your pensions in a UK tax year (6 April to 5 April) while still receiving tax relief. For 2026/27 the standard allowance is £60,000; but it's one of five figures that can apply, and the lowest one that applies to you is the one that governs.

The other four are the tapered annual allowance for higher earners (reducing the £60,000 to as little as £10,000), the £10,000 money purchase annual allowance for those who have flexibly accessed a defined contribution pension, the £3,600 floor for non-earners, and the cap of 100% of your UK earnings on personal contributions - all summarised below. The allowance applies across all your pension arrangements combined, not per scheme.

For the senior professionals NOVA works with - partners with substantial earnings, MDs absorbing deferred compensation, business owners in a year of sale - getting the annual allowance arithmetic right can be one of the highest-value planning decisions in any given tax year. The interaction between these five figures is the source of most contribution miscalculations. This guide explains each one and how they interact for high earners.

What is the pension annual allowance?

What's measured against the allowance is called your pension input amount, and it is more than just the cash you pay in. It combines your personal contributions, your employer's contributions, and, for any defined benefit pension, the growth in the capitalised value of your promised future income over the year (more on each below).

The allowance runs against the UK tax year, 6 April to 5 April, not the calendar year. The standard figure has been £60,000 since 6 April 2023, raised from the £40,000 that applied from 2014/15 to 2022/23 under the Finance (No. 2) Act 2023, and it remains £60,000 through 2026/27. The rules and definitions are set out in HMRC's Pensions Tax Manual at PTM057100.

The five figures that might apply to you

Five separate figures can shape your annual allowance in 2026/27. The lowest applicable figure governs, and more than one can apply simultaneously.

#	Figure	Amount (2026/27)	Who it applies to
1	Standard annual allowance	£60,000	Most individuals
2	100% of relevant UK earnings cap	Your earnings	Limits personal contributions, regardless of allowance
3	Tapered annual allowance	As low as £10,000	Higher earners with adjusted income above £260,000
4	Money Purchase Annual Allowance (MPAA)	£10,000	Those who have flexibly accessed a defined contribution pension
5	Non-earner allowance	£3,600 (gross)	Those without UK relevant earnings

A reader at standard earnings with no taper, no MPAA, and no DB pension issues operates entirely on figure 1, capped by figure 2. A senior partner earning £350,000 with previous flexi-access drawdown may be subject to figures 2, 3, and 4 simultaneously - and the lowest of the three governs. We often see this combined-constraint scenario, particularly with clients who took a small lump sum from a former employer's pension years before considering large current contributions.

What counts towards your annual allowance

Three categories of contribution count, and the rules differ for each.

Personal contributions include the gross amount you pay into your pensions plus the basic-rate tax relief HMRC adds automatically (the relief-at-source mechanic). All personal contributions count towards the allowance.

Employer contributions count in full - including pension contributions made via salary sacrifice, which are technically reclassified as employer contributions for HMRC purposes. Employer contributions don't reduce your take-home pay and aren't subject to the 100% earnings cap that limits personal contributions.

Pension input amount for defined benefit pensions is the figure that matters for any final salary or career average pension. It is not what was paid in, it's the increase in the capitalised value of your promised future income over the year. A salary increase, inflation adjustment, or change in pensionable service can produce a meaningful pension input amount even without you contributing anything extra. The key point here is that a DB pension can consume annual allowance even in a year you made no contributions.

What doesn't count separately: contributions paid by a third party into your pension (a spouse, parent, or other individual) are treated as your own personal contribution and remain subject to the earnings cap.

The 100% of earnings cap on personal contributions

Personal contributions eligible for tax relief are capped at 100% of your relevant UK earnings, or the annual allowance, whichever is lower. This is the rule most commonly missed in contribution planning.

Relevant UK earnings means salary, bonus, commission, and self-employed trading profits - it does not include dividend income, rental income, or savings interest. For a director-shareholder paid mostly through dividends, this is the constraint that bites: even with £60,000 of annual allowance available, personal contributions are capped at the salary portion of their income.

A director paid £12,500 in salary plus £150,000 in dividends has personal contribution headroom of just £12,500; regardless of how much allowance is available. So, some business owners may consider employer pension contributions as part of wider remuneration and retirement planning, depending on their circumstances.

Tapered annual allowance: the high-earner cliff

For senior partners, MDs, and senior bankers whose adjusted income exceeds £260,000, the standard £60,000 allowance tapers down to as little as £10,000.

The taper is dual-tested: it applies only when adjusted income exceeds £260,000 and threshold income exceeds £200,000. Where both are met, the allowance reduces by £1 for every £2 of adjusted income above £260,000, until it reaches the £10,000 floor (at £360,000 of adjusted income).

The interaction with carry forward is where the most expensive miscalculations happen: you carry forward the tapered allowance from earlier years, not the standard £60,000. The mechanics, the dual-test edge cases, and worked examples by income level are covered in the Tapered Annual Allowance pillar.

Money Purchase Annual Allowance (MPAA)

The Money Purchase Annual Allowance, or MPAA, is a reduced £10,000 annual allowance that applies once you have flexibly accessed a defined contribution pension. It limits future contributions to defined contribution pensions specifically, not your overall pension saving across all schemes.

The MPAA is triggered by specific actions: taking taxable income from a flexi-access drawdown arrangement, taking certain uncrystallised funds pension lump sum (UFPLS) withdrawals, or exceeding the income limit on certain capped drawdown plans. It is not triggered by taking a tax-free lump sum alone or by purchasing an annuity.

Once triggered, the MPAA applies permanently - you cannot return to the standard £60,000 allowance afterwards. Carry forward does not extend it: unused allowance from earlier years cannot be used to make defined contribution contributions above £10,000 in any year the MPAA applies. This catches readers in their 50s and 60s who took a small lump sum from a former employer's pension before considering whether they wanted to keep contributing. Full mechanics are covered in the dedicated Money Purchase Annual Allowance article.

Carry forward of unused allowance

Carry forward allows unused allowance from the previous three tax years to be added to your current-year allowance, making larger contributions possible where earlier-year allowance was not fully used. To carry forward from a previous year, you must have been a member of a UK registered pension scheme during that year. The 100% earnings cap on personal contributions still applies in the current year, regardless of how much carried-forward allowance is available.

The full mechanics, the calculation steps, and the tapered AA interaction are covered in the Carry Forward Pension Allowance article.

When you exceed the annual allowance: the tax charge

If your total pension input across all your pensions exceeds your annual allowance plus any carried-forward allowance, the excess is subject to an annual allowance tax charge at your marginal income tax rate. For an additional-rate taxpayer, that means 45% tax on the excess contribution, which removes most of the tax relief the contribution attracted in the first place, and can make exceeding the allowance materially counterproductive.

The charge is normally added to your Self Assessment in the relevant tax year. Where it is significant, generally over £2,000 and meeting specific conditions, the scheme pays mechanism may apply, but whether this is appropriate will depend on the individual’s circumstances and objectives.

The detail of how the charge is calculated, when scheme pays applies, and the deadlines for the election are covered in the Annual Allowance Tax Charge article.

Why the annual allowance matters for high earners

For senior professionals, getting the annual allowance arithmetic right can be one of the highest-value planning decisions in any given tax year - for three reasons that compound.

First, marginal tax relief is substantial. Pension contributions attract relief at your marginal rate - 40% for higher-rate taxpayers and 45% for additional-rate. For earners in the £100,000–£125,140 personal-allowance-withdrawal band, the effective relief reaches 60%, so a £10,000 gross contribution costs £4,000 net.

Second, the allowance interacts with other planning thresholds. A pension contribution reduces adjusted net income, which is the figure that determines both the £100k tax trap (loss of personal allowance and childcare eligibility) and the tapered annual allowance itself. 

Pension contributions can be used to affect adjusted net income and associated tax thresholds, but whether that’s appropriate depends on an individual’s circumstances.

Third, missed allowance is permanently lost after three years. For high earners moving in and out of years where the taper applies, actively managing the allowance rather than letting it lapse can add up to substantial uncaptured tax relief over a career.

How NOVA can help

A common annual allowance conversation we have at NOVA is with senior professionals in the November–March window, working out their headroom against a known year-end bonus, business sale event, or RSU vest. The arithmetic involves four or five interacting figures - the standard allowance, the tapered AA if applicable, the MPAA if relevant, the earnings cap, and any carry forward available - and the difference between a casual estimate and a properly modelled position can be significant. It is also worth checking whether you have exceeded the allowance in previous years and have an annual allowance tax charge to settle. And for couples, looking at both partners' allowances together can open up options that neither would have alone.

If you'd like to speak to a NOVA adviser about navigating the annual allowance, we offer a free 15-minute introductory call. There's no obligation and no charge.

How this article was prepared

This article was written by Ash Parsons, Financial Adviser and Partner at NOVA Wealth. It cites HMRC's Pensions Tax Manual, GOV.UK guidance, and the Finance (No. 2) Act 2023 directly, with primary sources linked inline at the point of claim. The figures and rules stated reflect the position for the 2026/27 UK tax year.

Capital at risk. Prevailing tax rates and reliefs are dependent on your individual circumstances and are subject to change. We do not provide tax advice. This article does not constitute personal advice. All figures quoted are for illustration purposes only. If you are unsure of your options you should seek professional financial advice or visit Pensionwise.gov.uk.

Issued on behalf of Nova. Nova is a trading name of Nova Wealth Ltd, which is authorised and regulated by the Financial Conduct Authority (FRN: 778951) and is a limited company registered in England & Wales (10739796).

Sources

• HMRC Pensions Tax Manual PTM057100 - Annual allowance: general

• HMRC Pensions Tax Manual PTM055100 - Carry forward: general

• HMRC Pensions Tax Manual PTM056100 - Money Purchase Annual Allowance

• HMRC Pensions Tax Manual PTM056300 - Annual allowance charge

• HMRC Pensions Tax Manual PTM058010 - Tapered annual allowance

• GOV.UK - Tax on your private pension contributions

• Finance (No. 2) Act 2023 - annual allowance increase

About the author

Ash Parsons, Financial Adviser. Ash is a Partner at NOVA Wealth, based in London. He works primarily with busy professionals and business owners on pension and retirement planning, investment strategy, and personal tax planning - helping clients make confident decisions about their money without it taking over their time. Connect with Ash on LinkedIn.