Answers · UK 2025/26

How does the tapered annual allowance reduce pension contributions for high earners UK 2026?

For 2026/27, high earners with threshold income above GBP 200,000 and adjusted income above GBP 260,000 have their GBP 60,000 annual allowance tapered down by GBP 1 for every GBP 2 of adjusted income above GBP 260,000, to a minimum of GBP 10,000.

Last updated: 14 June 2026Last reviewed: 14 June 2026How we verify

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What Is the Tapered Annual Allowance? The tapered annual allowance (TAA) reduces the standard pension annual allowance for very high earners. In 2026/27 the standard annual allowance is GBP 60,000, but for those caught by the taper, this can fall as low as GBP 10,000. The Two Income Tests Two income thresholds must both be exceeded for the taper to apply: 1. Threshold income: Your net income (total income minus personal pension contributions) must exceed GBP 200,000. 2. Adjusted income: Your gross income including all employer pension contributions must exceed GBP 260,000. If your threshold income is GBP 200,000 or below, the taper does not apply regardless of adjusted income -- this protects individuals whose high gross income is largely due to large employer contributions. How the Taper Is Calculated For every GBP 2 of adjusted income above GBP 260,000, the annual allowance falls by GBP 1. The minimum tapered annual allowance is GBP 10,000, reached when adjusted income hits GBP 360,000. Example: - Adjusted income: GBP 300,000 - Excess above GBP 260,000: GBP 40,000 - Reduction: GBP 40,000 divided by 2 = GBP 20,000 - Tapered annual allowance: GBP 60,000 minus GBP 20,000 = GBP 40,000 Money Purchase Annual Allowance (MPAA) Separately, if you have flexibly accessed a defined contribution pension (taken flexible drawdown or an uncrystallised funds pension lump sum), the MPAA of GBP 10,000 applies to future money purchase contributions. The MPAA and TAA interact in complex ways and professional advice is strongly recommended in this situation. Carry Forward If you have unused annual allowance from the three previous tax years, you can carry it forward to increase the amount you can contribute without a tax charge. However, carry forward does not increase a tapered allowance -- it adds to whatever your tapered figure is, subject to the carry forward rules. Annual Allowance Charge Contributions (employee plus employer) exceeding your annual allowance in any tax year trigger an annual allowance charge. This is added to your income tax bill and taxed at your marginal rate. The charge is declared on your Self Assessment return. Defined Benefit Schemes For defined benefit (DB) pension members, the pension input amount is calculated by multiplying the annual benefit accrual by 16 (plus any lump sum increase), which can produce a surprisingly large input even from modest salary increases -- a particular issue for high earners in public sector schemes.