Answers · UK 2025/26
How does the tapered pension annual allowance work on £300,000 income?
On adjusted income of £300,000 in 2026/27, the £60,000 pension annual allowance is reduced by £1 for every £2 above the £260,000 taper threshold. £40,000 above the threshold means a £20,000 reduction, giving a tapered annual allowance of £40,000.
Full answer
High earners face a tapered pension annual allowance, which reduces the standard £60,000 annual allowance for anyone with "adjusted income" above £260,000 for 2026/27. The taper reduces the allowance by £1 for every £2 of adjusted income above the £260,000 threshold, down to a minimum floor of £10,000, reached once adjusted income hits £360,000. On adjusted income of £300,000, the amount above the £260,000 threshold is £40,000. Dividing this by 2 gives a reduction of £20,000, so the annual allowance is reduced from £60,000 to £40,000. This tapered £40,000 is the maximum that can be paid into pensions across all schemes (personal and employer contributions combined) in the tax year while still receiving full tax relief, without triggering an annual allowance tax charge on any excess. "Adjusted income" is a wide measure that includes salary, bonus, dividends, rental income and other taxable income, plus pension contributions added back in -- so bonus-heavy years can unexpectedly trigger or increase the taper. High earners affected by the taper often rely on "carry forward," which allows unused annual allowance from the previous three tax years to be added to the current year's tapered allowance, provided they were a member of a registered pension scheme throughout. Employers sometimes offer a cash alternative to pension contributions for staff who have used up their tapered allowance. Use the pension calculator to check your own tapered allowance.
More answers
This answer is informational only and does not constitute financial, tax or legal advice. Figures are for the 2025/26 UK tax year. See our methodology and sources.