Pension Carry Forward 2026: How to Contribute Up to £240,000 in One Tax Year
Carry forward lets you use unused Annual Allowance from the past three tax years. In 2026/27, you could potentially contribute up to £240,000 to your pension. Who benefits, how to calculate it, and the crucial IHT deadline.
Quick answer
Carry forward is one of the most powerful and underused pension tools in the UK tax system. If you have been a pension scheme member but contributed less than £60,000/yr in recent years, you can potentially contribute the accumulated unused allowance in one year — and get income tax relief at your marginal rate on the entire amount.
In 2026/27, if you have full carry-forward available, that is up to £240,000 into your pension in a single year. For a 40% taxpayer, HMRC effectively funds £96,000 of that.
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Open Pension calculatorHow carry forward works
The Annual Allowance (AA) is the maximum you can contribute to all registered pension schemes in a tax year. In 2026/27 it is £60,000.
If you did not use all of your AA in the past three tax years, the unused amount carries forward and can be used in the current year on top of the standard £60,000.
The three carry-forward years in 2026/27:
| Tax year | Standard AA | Used (example) | Carry-forward available |
|---|---|---|---|
| 2023/24 | £60,000 | £10,000 | £50,000 |
| 2024/25 | £60,000 | £8,000 | £52,000 |
| 2025/26 | £60,000 | £0 | £60,000 |
| 2026/27 (current) | £60,000 | — | — |
| Total available | £222,000 |
In the above example, the person can contribute up to £222,000 in 2026/27 (current year £60,000 + £162,000 carry-forward), subject to having sufficient UK earnings.
The earnings cap
Your total pension contributions in a tax year cannot exceed 100% of your UK earnings in that year. If your salary is £90,000, you cannot contribute more than £90,000 regardless of how much carry-forward is available.
This limits carry-forward usefulness to high earners or those with windfall income (sold a business, received a large bonus, inherited cash).
Order of use
HMRC rules require you to use carry-forward in this order:
- Current year's AA first (£60,000 in 2026/27).
- Oldest carry-forward year first (2023/24, then 2024/25, then 2025/26).
This matters for the Tapered AA calculation, as different years may have different tapering.
Worked example: business owner with a good year
Alice, sole director of a Ltd company. Annual salary £12,570 (PA only). Dividend income £80,000. Prior pension contributions: minimal.
In 2026/27, Alice's company has a record year and she wants to extract value tax-efficiently.
Carry-forward available (simplified):
| Year | AA | Used | Available |
|---|---|---|---|
| 2023/24 | £60,000 | £3,600 | £56,400 |
| 2024/25 | £60,000 | £3,600 | £56,400 |
| 2025/26 | £60,000 | £3,600 | £56,400 |
| 2026/27 | £60,000 | (this year) | £60,000 |
Total carry-forward + current year: £229,200
Alice's constraint: her total UK earnings in 2026/27 must cover the contribution. Salary £12,570 + dividends: dividends are not "relevant UK earnings" for pension purposes. Only employment income, self-employment income and some partnership income count.
Problem: if Alice pays herself only £12,570 in salary, her 100% earnings cap is £12,570. She cannot use the full carry-forward without increasing her salary.
Solution: Alice increases her salary to £80,000 before April 2027 (paying employer and employee NI on the excess) — but a company pension contribution avoids employer NI entirely. The company makes an employer pension contribution of up to £80,000 (the AA for the year with carry-forward applied to employer contributions included in the total input).
Note: employer contributions count toward the Annual Allowance. The combined employer + employee total must stay within the AA (plus carry-forward).
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Open Salary Sacrifice calculatorThe Tapered Annual Allowance
For very high earners, the carry-forward calculation is more complex because the AA may have been tapered in prior years.
Tapered AA applies when:
- Threshold income (total income minus own pension contributions) > £200,000, AND
- Adjusted income (threshold income + employer contributions) > £260,000.
Where both conditions are met, the AA reduces by £1 for every £2 of adjusted income above £260,000, to a minimum of £10,000.
Example: in 2024/25, James had adjusted income of £300,000. His AA was tapered to £40,000. If James used only £15,000 of contributions in 2024/25, his carry-forward from that year is £25,000 — not £45,000 as it would be under the untapered AA.
Check each year's tapering position individually before calculating total carry-forward.
Why act before April 2027: the IHT change
Currently, pension pots pass outside the estate for inheritance tax purposes. If you die, your beneficiaries receive the pension fund free of IHT. This makes pension funds an efficient vehicle for intergenerational wealth transfer.
From April 2027, the government intends to bring unused pension funds into the estate for IHT purposes. Beneficiaries may pay IHT at 40% on inherited pension funds in addition to income tax when they draw them down.
Before April 2027, maximising pension contributions has two tax advantages:
- Now: income tax relief at marginal rate on contributions.
- Legacy: pension pot passes outside the estate for IHT — potentially saving 40% on the value.
After April 2027, pensions will still be tax-efficient for growth and income purposes, but lose the IHT advantage. For those with large estates who are approaching retirement, the window to maximise pension before April 2027 is strategically significant.
Carry-forward combined with salary sacrifice
If you are employed, combining carry-forward with salary sacrifice is the most NI-efficient route:
- Salary sacrifice reduces your pensionable salary.
- Your employer avoids 13.8% employer NI on the sacrificed amount.
- You avoid 8% (or 2%) employee NI on the sacrifice.
- Income tax relief at marginal rate on the gross pension contribution.
Example: £100,000 salary, want to contribute £80,000 to pension using carry-forward
| Route | Income tax saving | NI saving | Total relief |
|---|---|---|---|
| SIPP (relief at source) | £32,000 (40%) | £0 | £32,000 |
| Salary sacrifice | £32,000 (40%) | £1,600 (2% NI) | £33,600 |
Salary sacrifice captures an additional £1,600 saving on the same contribution. For larger amounts, the difference is proportionally greater.
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Open Income Tax calculatorPractical steps to use carry forward in 2026/27
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Gather pension statements for 2023/24, 2024/25 and 2025/26. Defined contribution: total contributions. Defined benefit: the "input" figure on the annual pension statement (usually provided by the scheme administrator).
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Calculate unused AA for each year. AA minus contributions = carry-forward per year.
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Check the earnings cap. Your total contributions this year cannot exceed 100% of your UK relevant earnings.
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Contact your pension provider. They will guide the mechanics. For a SIPP, you simply make a larger bank transfer. For a workplace scheme, inform HR or the provider that you are using carry-forward.
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Keep records. You don't file carry-forward with HMRC automatically, but if you are ever investigated, you need to demonstrate the calculation. Keep pension statements for all three prior years.
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Claim tax relief. For contributions to a SIPP (relief at source), the provider claims basic-rate relief. For higher-rate relief, claim via Self Assessment.
Sources
- HMRC: Pension annual allowance carry forward
- HMRC: Annual allowance for pension savings
- HMRC: Tapered annual allowance
- HM Treasury: IHT and pensions from April 2027
Frequently asked questions
What is pension carry forward?
Carry forward allows you to use any unused Annual Allowance from the previous three tax years in the current tax year. This lets you contribute more than the standard £60,000 Annual Allowance in a single year, provided you have genuinely unused allowance from prior years and sufficient UK earnings.
How much can I contribute using carry forward in 2026/27?
If you had £60,000 Annual Allowance in each of 2023/24, 2024/25 and 2025/26 and used none of it, plus the current year's £60,000, the maximum is £240,000 gross in 2026/27. In practice this is limited to 100% of your UK earnings in the current year.
What are the Annual Allowances for the carry-forward years?
All three carry-forward years (2023/24, 2024/25, 2025/26) have a standard Annual Allowance of £60,000. If you were a member of a pension scheme in those years and contributed less than £60,000, you have carry-forward available.
Must I have been in a pension scheme in the carry-forward years?
Yes. You must have been an active member of a registered pension scheme (including a workplace pension, SIPP, or any other UK registered pension) in each year from which you carry forward. You do not need to have contributed anything in that year — just been a member.
Does carry forward affect the Tapered Annual Allowance?
The Tapered Annual Allowance applies to high earners (adjusted income above £260,000). If your AA was tapered in a prior year, your carry-forward from that year is the tapered amount, not £60,000. Check each year individually.
Who benefits most from pension carry forward?
High earners who received a windfall (business sale, inheritance, large bonus), business owners who had low-profit years previously, and anyone who wants to make a large pension contribution before the April 2027 IHT change (which will bring pensions into the estate for inheritance tax purposes).
Can I use carry forward if I'm employed with a workplace pension?
Yes, but employer contributions count toward your Annual Allowance. Carry forward is based on the difference between the AA in each prior year and the total of all contributions (employee + employer + any other source) to all registered pension schemes.
What is the IHT deadline mentioned in relation to pensions?
From April 2027, unused pension funds are expected to be included in the deceased's estate for inheritance tax purposes. Before this change, maximising pension contributions provides significant tax-efficient wealth accumulation — contributions now reduce the potential IHT bill on your estate and grow tax-free.
Is there a minimum earnings requirement for carry forward?
Your total pension contributions in the current tax year (including carry forward) cannot exceed 100% of your UK earnings in that year. If your salary is £80,000, you cannot contribute more than £80,000 total even if carry-forward technically allows more.
How do I actually make a carry-forward contribution?
Contact your pension provider and tell them you wish to make a large contribution using carry forward. Many providers have a form. You do not inform HMRC separately — the calculation is self-assessed. Keeping records of your Annual Allowance usage for each year is essential for your own records.
Try the calculators
Pension Calculator
Estimate your pension pot at retirement and projected annual income.
Salary Sacrifice Calculator
Calculate how much tax and National Insurance you save by making salary sacrifice contributions to a pension, cycle to work scheme or EV car scheme.
Income Tax Calculator
Work out how much income tax you owe using the latest 2025/26 UK tax bands.
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