Pension Carry Forward 2025/26: Use Three Years of Unused Allowance

Quick answer

The UK pension annual allowance is the total you (and your employer combined) can pay into your registered pension schemes each tax year without a tax charge. For 2025/26 it's £60,000 (unchanged after Spring Budget 2026).

Carry forward lets you use unused annual allowance from the three previous tax years if your current year's contribution exceeds £60,000. The relevant years and historical limits:

So in 2025/26 you can contribute up to £220,000 if all three previous years' allowance is unused — minus any contributions actually made in those years.

Who can use carry forward

To claim carry forward, all of the following must be true:

1. You were a member of a registered UK pension scheme in each tax year you carry forward (active, deferred or contributing — but not just a SIPP you never opened).
2. You have relevant UK earnings in 2025/26 at least equal to the total amount you want to contribute and get full relief on.
3. You're not subject to the money purchase annual allowance (MPAA) — you haven't flexibly accessed defined-contribution pension benefits (otherwise your DC allowance drops to £10,000/year with no carry forward).
4. You're not in the tapered allowance zone — for adjusted income above £260,000 the allowance starts tapering down (minimum £10,000).

The rules step-by-step

1. Fill your current tax year's £60,000 allowance first.
2. Then use the oldest year's unused allowance (the year furthest back in scope).
3. Then move to the next-oldest year, and so on.
4. You can't skip a year — it's strictly FIFO.

Anything not used after four years (current + 3 carried) is lost.

Worked example — Tom, 52, business sale year

Tom is a 52-year-old higher-rate taxpayer who has just sold a business and has £200,000 of taxable earnings in 2025/26. His pension history:

Total carry forward available: £30k + £45k + £40k = £115,000 unused.

Plus 2025/26's £60,000 = £175,000 of headroom before any tax charge.

Tom's earnings (£200,000) cap relief at his earnings, so he can contribute up to £175,000 with full tax relief. He decides to contribute £150,000 from the business sale proceeds via a SIPP.

Tax saved:

• Basic-rate relief at source (20%): £37,500 added by the provider → £150,000 net cost becomes £187,500 in pension.
• Higher-rate relief reclaimed via Self Assessment (additional 20% on the slice in the 40% band): roughly £24,000.
• Personal allowance restored above the £100k taper: additional ~£5,000 saved.
• Total effective tax relief: roughly £66,500 on a £150,000 net contribution.

Tom ends up with £187,500 in his pension at a true after-tax cost of roughly £83,500.

When carry forward is most useful

• Bonus / business sale / large windfall years. One-off income above £100k or £125k where you want to drop adjusted income.
• Self-employed lumpy income. Carry forward smooths multi-year tax planning.
• Late starters. Approaching retirement with low pension pot — front-loading contributions before income drops.
• Inheriting a one-off cash sum. Sweeping it efficiently into pension to compound tax-free.

Limits to watch

1. Earnings cap (the real constraint for most)

Tax relief applies only on contributions up to your relevant UK earnings for that tax year. If you earn £80,000, you can't make £150,000 of tax-relieved contributions even if the allowance permits it.

Non-earners can still contribute up to £2,880/year net (£3,600 grossed up) with relief — but no more, even with carry forward.

2. The lifetime allowance — abolished but not entirely

The lifetime allowance was abolished from 6 April 2024. But two related caps replaced it:

• Lump Sum Allowance: £268,275 (25% tax-free cash limit).
• Lump Sum and Death Benefit Allowance: £1,073,100.

Carry forward big sums into pension and you may hit the LSA at retirement — meaning later withdrawals over 25% of the LSA come out as fully taxable income, not 25% tax-free.

3. Money Purchase Annual Allowance (MPAA)

Once you've flexibly drawn taxable income from a defined-contribution pension (Uncrystallised Funds Pension Lump Sum or drawdown income), your DC allowance drops to £10,000/year permanently and carry forward is lost for DC contributions.

Tapping pension flexibly before fully using carry forward is one of the most expensive UK tax mistakes — easily £40,000+ in lost relief.

4. Anti-recycling rules

You can't take 25% tax-free cash from one pension and immediately recycle it back as a new contribution — HMRC's recycling rules trigger a tax charge if a planned, significant pattern exists.

How to actually do it

1. Check pension history: log into all your providers (current + historical workplace pensions, SIPPs).
2. Calculate unused allowance per year: contributions you made + employer made, vs the annual allowance for that year.
3. Confirm scheme membership in all 3 prior years — even a deferred workplace pension counts.
4. Confirm earnings: 2025/26 earnings must cover the contribution you plan.
5. Make the contribution by 5 April 2026 (this tax year's deadline).
6. Report on Self Assessment if you want higher- or additional-rate relief beyond basic.

Providers don't enforce the annual allowance check — it's your responsibility to keep within limits.

What if you go over?

If total contributions exceed available allowance (current + carry forward), you pay an annual allowance charge on the excess at your marginal rate (typically 40% or 45%). This usually means the pension contribution above the limit gives you zero or even negative net benefit — easy to avoid with simple bookkeeping.

You report the charge on Self Assessment. Most pension schemes can pay the charge from your pension via "Scheme Pays" if it's >£2,000.

Try the numbers

Related reading:

• The £100k tax trap 2025/26
• Pension 25% tax-free lump sum
• SIPP vs workplace pension 2026
• Pension annual allowance charge

Sources

• HMRC: Pension carry forward technical guidance (PTM055100)
• HMRC: Tax on your private pension contributions
• HMRC: Annual allowance worked examples
• gov.uk: Self Assessment: pension contributions
• HMRC: Money Purchase Annual Allowance