The Tapered Pension Annual Allowance Explained (2026/27)
How the tapered annual allowance reduces pension tax relief for high earners above £260,000 adjusted income in 2026/27, with a worked example.
How the Taper Works
| Adjusted income | Tapered annual allowance |
|---|---|
| £260,000 or below | £60,000 (no taper) |
| £280,000 | £50,000 |
| £300,000 | £40,000 |
| £320,000 | £30,000 |
| £340,000 | £20,000 |
| £360,000 and above | £10,000 (floor) |
The reduction is £1 for every £2 of adjusted income above £260,000, capped so the allowance never falls below £10,000.
Worked Example: £300,000 Adjusted Income
| Step | Calculation | Result |
|---|---|---|
| Adjusted income | £300,000 | |
| Excess over £260,000 threshold | £300,000 - £260,000 | £40,000 |
| Reduction | £40,000 ÷ 2 | £20,000 |
| Tapered annual allowance | £60,000 - £20,000 | £40,000 |
Anyone contributing (personally plus employer) more than their tapered allowance in a tax year, without sufficient carry-forward available, faces an annual allowance charge on the excess at their marginal Income Tax rate.
Two Tests, Both Must Be Failed to Trigger the Taper
| Test | Definition | Threshold |
|---|---|---|
| Threshold income | Taxable income minus certain pension contributions | Must exceed £200,000 |
| Adjusted income | Taxable income plus employer and employee pension contributions | Must exceed £260,000 |
If threshold income is £200,000 or below, the taper doesn't apply at all, regardless of how high adjusted income is — this is a common point of confusion for high earners with large employer pension contributions.
Annual Allowance Reference Table (2026/27)
| Allowance type | 2026/27 value |
|---|---|
| Standard annual allowance | £60,000 |
| Tapered annual allowance floor | £10,000 |
| Taper start (adjusted income) | £260,000 |
| Taper floor reached at (adjusted income) | £360,000 |
| Money Purchase Annual Allowance (separate rule) | £10,000 |
Take-Home Pay Calculator
Calculate your net salary after income tax, National Insurance and student loan deductions.
Open Take-Home Pay calculatorFrequently asked questions
What is the tapered annual allowance in 2026/27?
The tapered annual allowance reduces the standard £60,000 pension annual allowance by £1 for every £2 of 'adjusted income' above £260,000, down to a minimum floor of £10,000, which is reached once adjusted income hits £360,000.
How is 'adjusted income' different from 'threshold income'?
Adjusted income is total taxable income plus employer and employee pension contributions. Threshold income is total taxable income minus certain pension contributions. Both tests must be met before the taper applies — if threshold income is below £200,000, the taper doesn't apply regardless of adjusted income.
What is the annual allowance taper floor?
£10,000. However high your adjusted income goes above £360,000, the tapered annual allowance cannot fall below this floor for 2026/27.
How much annual allowance does someone with £300,000 adjusted income have?
£300,000 is £40,000 above the £260,000 threshold. The taper reduces the £60,000 allowance by £1 for every £2 over £260,000, so £40,000 ÷ 2 = £20,000 reduction, leaving a £40,000 tapered annual allowance.
What happens if I exceed my tapered annual allowance?
Contributions above your tapered allowance (after using any available carry-forward from the previous three tax years) trigger an annual allowance charge, effectively clawing back the tax relief at your marginal rate on the excess — this can be a significant unplanned tax bill if not monitored.
Can carry-forward help with the tapered annual allowance?
Yes, unused annual allowance from the previous three tax years can sometimes be carried forward, but the calculation uses the allowance that actually applied in each of those years (which may itself have been tapered), making this a genuinely complex area — professional advice is strongly recommended for high earners near the taper.
Does the tapered annual allowance affect defined benefit pension scheme members?
Yes, though the 'pension input amount' for defined benefit schemes is calculated differently, using a notional growth-in-value formula rather than simple contributions — this can produce large and sometimes unexpected input amounts in years of significant salary growth or promotion, particularly for senior NHS and public sector staff.
Is the Money Purchase Annual Allowance the same as the tapered annual allowance?
No — they're separate restrictions that can both apply to different people. The Money Purchase Annual Allowance (£10,000 for 2026/27) applies once someone has flexibly accessed a defined contribution pension, regardless of income, while the tapered annual allowance applies to high earners regardless of whether they've accessed a pension.
Related reading
UK Self Assessment From Scratch — Part 8: After You File
What happens after you submit your Self Assessment return — refunds, balancing payments, amendments, HMRC enquiries, the SA302 for mortgages, and the 5-year record-keeping rule
UK Self Assessment From Scratch — Part 7: Making Tax Digital for Income Tax
Making Tax Digital for Income Tax (MTD ITSA) starts April 2026 for £50k+ self-employed and landlords. Here's what it means, when it applies to you, the software requirements and how it changes Self Assessment forever.
UK Self Assessment From Scratch — Part 6: Payments on Account Explained
How HMRC's payments-on-account system works, why your first January bill is bigger than expected, when to reduce them, and the trap of treating January and July as separate