Answers · UK 2025/26

How does the tapered pension Annual Allowance work for high earners in 2026/27?

The pension Annual Allowance tapers for high earners: if your adjusted income exceeds £260,000, your standard £60,000 Annual Allowance reduces by £1 for every £2 above that threshold, down to a minimum of £10,000 once adjusted income reaches £360,000. It only applies if your threshold income also exceeds £200,000.

Last updated: 1 July 2026Last reviewed: 1 July 2026How we verify

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The Annual Allowance is the maximum amount that can be paid into your pensions each tax year while still receiving tax relief, and while the standard figure is £60,000 for 2026/27, high earners can see this reduced ("tapered") significantly. **The two-part test** The taper only bites if BOTH of these conditions are met: 1. **Threshold income exceeds £200,000** -- broadly your total taxable income for the year, before pension contributions, minus certain deductions. 2. **Adjusted income exceeds £260,000** -- broadly your threshold income PLUS your own and your employer's total pension contributions for the year. If threshold income is £200,000 or below, the taper does not apply at all, regardless of how high adjusted income might otherwise be -- this protects people with large one-off employer contributions but modest salary from being unexpectedly tapered. **How the taper reduces the allowance** For every £2 that adjusted income exceeds £260,000, the £60,000 Annual Allowance reduces by £1, down to a minimum floor of £10,000, reached once adjusted income hits £360,000 (a £100,000 excess over £260,000, halved to £50,000 reduction, bringing £60,000 down to £10,000). **Worked example** A senior executive has threshold income of £220,000 (above £200,000, so the taper test applies) and adjusted income of £300,000 (£40,000 above the £260,000 taper start point). The reduction is £40,000 ÷ 2 = £20,000, so their Annual Allowance for the year is £60,000 − £20,000 = £40,000, rather than the standard £60,000. **Worked example: hitting the minimum floor** A very high earner with adjusted income of £400,000 (£140,000 above £260,000) would see a reduction of £70,000, but because the maximum possible reduction is capped at £50,000 (bringing £60,000 down to the £10,000 floor), their Annual Allowance is fixed at the minimum £10,000, not reduced further even though the raw calculation would suggest a bigger cut. **Consequences of exceeding your tapered allowance** If total pension contributions (yours plus your employer's) exceed your tapered Annual Allowance for the year, the excess is subject to an Annual Allowance tax charge, effectively clawing back the tax relief at your marginal rate -- reported via Self Assessment or, if the charge exceeds £2,000, potentially paid directly from the pension scheme under "Scheme Pays" arrangements. **Carry forward can help** Unused Annual Allowance (tapered or standard) from the previous three tax years can sometimes be carried forward to increase the amount you can contribute tax-efficiently in the current year, though the calculation becomes more complex when tapering is involved across different years.