Annual allowance

What annual allowance means

Annual allowance is the yearly amount of pension saving used to check whether an annual allowance tax charge may arise. It is not your pension balance, an investment target or permission to pay in a particular amount. UK tax years run from 6 April to the following 5 April.

HMRC lists the standard annual allowance as £60,000 for 2026/27. A lower allowance or unused allowance from earlier years may affect your position. The standard figure alone cannot establish what applies to you.

Sources: GOV.UK: Pension annual allowanceHMRC: Pension schemes rates

What counts across your schemes

For defined contribution pensions, the check includes contributions from you and others, including employers. Defined benefit pensions use a measured increase in the value of promised benefits, rather than simply adding your payslip deductions. Ask the scheme for its pension input amount.

The check covers pension saving across your schemes. Keeping a separate allowance for each pot would miss that combined picture. A change in a defined contribution pot’s market value is not the contribution total.

Sources: GOV.UK: Pension annual allowanceHMRC: Unused annual allowance and carry forward

A fictional record example

Alex has two defined contribution arrangements. The workplace record shows £8,000 in gross member contributions and £12,000 from the employer. A separate personal pension shows £5,000 in gross contributions. Those labelled records total £25,000 for the same tax year.

This illustrates combining records, not a personal allowance assessment. It assumes the figures already include any relief added to contributions and does not calculate defined benefit growth, a reduced allowance, carry forward or a tax charge. Do not add tax relief twice or treat this example as a recommended contribution.

Sources: HMRC: Unused annual allowance and carry forwardGOV.UK: Tax relief on private pension contributions

Why your allowance may be different

High income can bring a tapered annual allowance into play. Certain ways of flexibly accessing pension savings can trigger money purchase annual allowance rules. Taking pension money does not always trigger those rules, so check the particular event rather than guessing from the word “withdrawal”.

Keep any provider notification about flexible access and its date with your records. This definition does not decide which reduced rules apply to you; use HMRC’s current guidance for the relevant tax year.

Sources: GOV.UK: Pension annual allowanceHMRC: Money purchase annual allowance after flexible access

Carry forward has conditions

Unused annual allowance from the three previous tax years may help with the annual-allowance check. Membership of a qualifying pension scheme in the relevant earlier year is required: HMRC specifies a UK registered scheme or qualifying overseas scheme.

Current-year allowance is used before earlier unused amounts; earlier amounts are used oldest first. Do not assume an unused amount from an old statement is still available: other saving or previous use can affect it. Unused money purchase annual allowance cannot be carried forward. Carry forward cannot increase the money purchase annual allowance; separate alternative-allowance rules may still matter. Read the official conditions before treating an amount as available.

Sources: HMRC: Unused annual allowance and carry forwardHMRC: Carry forward order and conditions (PTM055100)HMRC: Money purchase annual allowance after flexible access

Annual allowance and tax relief are separate checks

Tax relief on your own contributions also has earnings-related rules. A headline annual allowance, or possible carry forward, does not automatically establish entitlement to relief on that amount. Employer contributions and your personal tax-relief position are different parts of the record.

For relief-at-source arrangements, distinguish the payment you made from the gross amount after relief is added. Ask the provider what a statement includes before comparing figures. Our tax-relief guide explains the record task; it does not calculate your entitlement.

Sources: GOV.UK: Tax relief on private pension contributions

If a tax charge may be due

HMRC explains when an annual allowance tax charge arises and when a pension scheme must or may pay it. Scheme payment is not automatic and reduces pension benefits. A charge still needs to be reported through Self Assessment even if the scheme pays it.

Check the official instructions and deadlines, and obtain appropriate tax help if your position is unclear. All Pensions does not calculate or file a tax charge, instruct a scheme to pay it, or recommend changing contributions.

Sources: HMRC: Who must pay the annual allowance tax charge

Keep a useful annual-allowance record

Keep a private list for the tax year with each scheme name, pension input amount, source document and any unanswered question. Preserve original labels and dates. A missing figure should remain unknown until the scheme explains it.

When asking for help, distinguish “statement requested”, “amount received” and “tax position checked”. Those are different outcomes. Use verified provider or HMRC channels for sensitive documents; this public definition needs no personal information.

• Ask each scheme which tax year its figures cover.
• Keep gross contributions, employer amounts and defined benefit input figures clearly labelled.
• Keep previous-year and flexible-access records separately from current-year totals.

Keep learning

• Defined contribution →
• Defined benefit →
• Employer contribution →
• Pension tax relief: understand the method and keep the right records →
• How to read a pension statement →
• Can I have five pensions? →
• Carry forward →
• Money purchase annual allowance →
• Tapered annual allowance →