Answers · UK 2025/26
How does the tapered pension annual allowance work on £320,000 income?
On adjusted income of £320,000 in 2026/27, the £60,000 pension annual allowance is reduced by £1 for every £2 above the £260,000 taper threshold. £60,000 above the threshold means a £30,000 reduction, giving a tapered annual allowance of £30,000.
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 £320,000, the amount above the £260,000 threshold is £60,000. Dividing this by 2 gives a reduction of £30,000, so the annual allowance is reduced from £60,000 exactly in half, to £30,000. This tapered £30,000 is the maximum that can be paid into pensions across all schemes in the tax year while still receiving full tax relief. At this income level, an annual allowance tax charge applies to any pension contributions above £30,000 in the year (before carry forward), effectively clawing back the tax relief at your marginal rate, which for additional-rate taxpayers can make excess contributions close to pointless from a tax perspective. "Adjusted income" includes salary, bonus, dividends, rental income and other taxable income, plus pension contributions added back in. High earners affected by the taper often use "carry forward" of unused allowance from the previous three tax years, provided they were a pension scheme member throughout those years, to make a larger one-off contribution without triggering the charge. Use the pension calculator to check your own tapered allowance and carry-forward position.
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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.