Tapered annual allowance

What tapered annual allowance means

Tapered annual allowance is a reduction in the annual pension-saving allowance for some high-income people. It is not a tax on the value of the pension pot and does not automatically mean a tax charge is due.

For 2026/27, taper applies when threshold income is more than £200,000 and adjusted income is more than £260,000. Both conditions matter. Equality with either limit does not satisfy that “more than” test.

Sources: HMRC: Work out your reduced tapered annual allowanceHMRC: Pension schemes rates

Two income definitions, not two salary figures

Threshold income and adjusted income are HMRC-defined calculations. Start from the relevant net-income concept, not take-home pay. Taxable income may include employment, self-employment, pensions, interest, dividends and rent; pension-related adjustments then differ between the two tests.

Adjusted income takes account of employer pension saving and other specified adjustments. Relevant salary-sacrifice or flexible-remuneration arrangements can require income to be added back when checking threshold income. Do not assume that lower cash salary alone avoids taper. Use HMRC’s detailed steps for the tax year.

Sources: HMRC: Work out your reduced tapered annual allowanceHMRC: Tapered annual allowance (PTM057100)

How the reduction works

Where the conditions apply, the allowance reduction is 50% of the adjusted-income excess above its limit, with the reduction rounded down to whole pounds. The minimum tapered annual allowance is £10,000 for 2026/27.

The minimum tapered allowance is not a recommendation or a separate allowance for each scheme. Earlier years have different rules and limits. This definition gives general context, not a personal allowance calculation.

Sources: HMRC: Tapered annual allowance (PTM057100)HMRC: Pension schemes rates

A fictional record example

Suppose Avery’s employment records show £190,000 of salary, £15,000 of bonus and £12,000 of employer pension contributions. Interest and other income have not yet been checked. These labels are useful evidence, but they are not completed threshold-income or adjusted-income calculations.

The salary and bonus total £205,000 in this fictional record. Do not compare that total alone with the income limits to decide taper. The example illustrates missing information and distinct labels; it does not establish Avery’s allowance, tax charge or an amount to contribute.

Sources: HMRC: Work out your reduced tapered annual allowance

Carry forward and MPAA remain separate questions

Eligible unused annual allowance from earlier years may affect the available annual allowance. Check the allowance that actually applied in each earlier year and any previous use; a tapered earlier allowance must not be replaced by that year’s headline standard amount.

If MPAA rules also apply, unused allowance cannot increase the MPAA. Separate alternative-allowance rules may matter. Keep any flexible-access statement and its date with the tax-year records rather than assuming taper replaces every other check.

Sources: HMRC: Tapered annual allowance (PTM057100)HMRC: Unused annual allowance and carry forwardHMRC: Money purchase annual allowance after flexible access

Personal contribution relief is another check

Tax relief on your own contributions has earnings-related conditions. A remaining annual allowance does not by itself establish entitlement to relief on that amount. Keep member payments, relief already added and employer contributions separately labelled.

A higher-rate Income Tax position also does not establish that taper applies. Our higher-rate guide explains contribution methods and claim routes; this definition explains a different pension-saving check.

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

Why careful records matter

Keep income documents and scheme pension-input statements for the same tax year. For defined benefit saving, ask the scheme for the pension input figure rather than substituting payslip deductions. Record the source, date and unanswered questions beside each figure.

All Pensions organises records. We do not calculate income tests, assess a tax charge, change salary arrangements or file a return. Seek HMRC or appropriate tax and pensions help where your figures or the rules are unclear.

• Which tax year does each income and pension record cover?
• Which figures are member contributions and which are employer saving?
• Are both income tests complete, or are important records still missing?

Sources: HMRC: Work out your reduced tapered annual allowance

Keep learning

• Annual allowance →
• Carry forward →
• Money purchase annual allowance →
• Salary sacrifice →
• Pension tax relief: understand the method and keep the right records →
• Pension contributions for higher-rate taxpayers: methods, claims and records →