Answers · UK 2025/26
What is the tapered pension Annual Allowance and who is affected in 2026/27?
The standard Annual Allowance is GBP 60,000. Tapering reduces it when Threshold Income exceeds GBP 200,000 AND Adjusted Income exceeds GBP 260,000 -- cut by GBP 1 per GBP 2 of Adjusted Income above GBP 260,000, to a minimum of GBP 10,000. High earners (typically GBP 260,000+ adjusted income) are most affected.
Full answer
The pension Annual Allowance (AA) limits the total pension contributions (personal plus employer) that attract tax relief in a tax year. Since April 2023, the standard AA is GBP 60,000. What is the tapered Annual Allowance? The tapered AA reduces the GBP 60,000 limit for very high earners. It was introduced in April 2016 and the thresholds were increased significantly from April 2020 to remove most doctors and senior public servants from its scope. Threshold Income: total income excluding employer pension contributions and pension input amounts; must exceed GBP 200,000 before tapering is considered. Adjusted Income: total income including employer pension contributions; must exceed GBP 260,000 for tapering to begin. Tapering formula For each GBP 2 of Adjusted Income above GBP 260,000, the AA reduces by GBP 1. Minimum tapered AA: 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 -- AA reduction = GBP 20,000 -- Tapered AA = GBP 40,000 Money Purchase Annual Allowance (MPAA) Separate from the taper: if you have flexibly accessed money from a defined contribution (DC) pension (e.g., drawdown), your AA for future DC contributions is reduced to GBP 10,000. The MPAA does not affect defined benefit (DB) accrual (though a separate GBP 50,000 DB alternative AA applies). Who is affected? Primarily: -- High-earning professionals (directors, City workers, senior NHS consultants) -- Those with generous employer pension contributions that push adjusted income over GBP 260,000 -- Carry forward: even tapered AA holders can carry forward unused AA from prior years, but the prior-year AA used for carry forward is also the tapered figure for those years Avoiding the taper Reducing Adjusted Income below GBP 260,000 avoids tapering. Strategies include: directing employer contributions to a different vehicle, taking bonus as employer pension contribution instead of cash.
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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.