Pension Carry Forward 2026/27: How to Use Up to 3 Years' Unused Annual Allowance

The pension annual allowance (AA) is the maximum amount you can pay into a registered pension scheme each year without incurring an excess charge. In 2026/27, the annual allowance is GBP 60,000. However, if you don't use your full allowance in a given year, you can carry forward any unused amount to the next three tax years. This "carry forward relief" is a powerful planning tool, especially for high-earning professionals and business owners with fluctuating incomes.

What is the Pension Annual Allowance?

The annual allowance is a limit on the amount of pension contributions (or the increase in value of your pension fund) that HMRC will permit tax-free each tax year. In 2026/27, you can contribute or accrue GBP 60,000 of pension value without triggering an excess charge.

For most people, the AA is comfortably above what they'll contribute in a year -- many people contribute only GBP 3,000-10,000. However, business owners, high earners, and those with large pension pots can quickly approach or exceed the AA, especially if their employer makes substantial contributions on their behalf.

Importantly, the annual allowance applies to:

• Defined contribution pensions (personal pensions, workplace pensions): The contributions made in the year.
• Defined benefit pensions (final salary schemes, public service pensions): An "accrued benefit" amount is calculated based on the increase in your pension value that year.

How Carry Forward Works

If you don't use your full annual allowance in a tax year, the unused amount can be carried forward and added to your allowance for the following tax year -- but only if you were a member of a registered pension scheme in that earlier year.

The rule is:

1. You can carry forward unused allowance from the previous 3 tax years (so in 2026/27, you can use allowance from 2023/24, 2024/25, and 2025/26).
2. You use carry forward in chronological order -- oldest first -- unless you elect otherwise.
3. You must have been a member of a registered pension scheme in the year you are carrying forward from (you don't need to be in the same scheme now).
4. The carry forward is automatic -- you don't need to file anything with HMRC before you contribute, though you will need to declare it on your tax return or via your pension provider.

Worked Example: Using Carry Forward

Let's say Sarah is a self-employed consultant with a Self-Invested Personal Pension (SIPP).

• 2023/24: Sarah contributes GBP 40,000 to her pension. AA = GBP 60,000 (old rate). Unused allowance: GBP 20,000.
• 2024/25: Sarah contributes GBP 35,000. AA = GBP 60,000 (increased to GBP 60,000 this year). Unused allowance: GBP 25,000. Carry forward from 2023/24: GBP 20,000. Total available = GBP 85,000. She doesn't use it.
• 2025/26: Sarah contributes GBP 50,000. AA = GBP 60,000. Available with carry forward = GBP 60,000 (current) + GBP 20,000 (from 2023/24) + GBP 25,000 (from 2024/25) = GBP 105,000. She doesn't exceed the allowance.
• 2026/27: Sarah has a very profitable year and wants to contribute GBP 180,000. Available allowance: GBP 60,000 (current) + GBP 25,000 (from 2024/25, as 2023/24 has now aged out) + GBP 50,000 (from 2025/26, unused amount after her GBP 50,000 contribution) = GBP 135,000.

Excess over AA: GBP 180,000 - GBP 135,000 = GBP 45,000.

Sarah will incur an excess annual allowance charge on GBP 45,000. The charge is 40% (income tax at her marginal rate) plus 2% (the AA charge), totalling 42%. She'd owe GBP 18,900 in tax on the excess.

Key Rule: You Must Have Been a Scheme Member

An important limitation: to carry forward an unused allowance from a previous year, you must have been a member of a registered pension scheme in that year. This doesn't have to be the same scheme you're in now, and you don't have to have made a contribution in that year -- simply being a member counts.

This catches people who took a career break, were unemployed, or switched jobs. If you left all pension schemes in 2025/26, you can't carry forward any 2025/26 unused allowance. You can, however, carry forward from 2024/25 and 2023/24 if you were in a scheme during those years.

The Money Purchase Annual Allowance (MPAA)

There's a special restriction called the Money Purchase Annual Allowance (MPAA) that affects some people. If you've already flexibly accessed your defined contribution pension (taken variable annuity payments, uncrystallised funds lump sum payment, or gone into capped drawdown), your annual allowance drops from GBP 60,000 to GBP 4,000 that year and onwards.

This is a significant restriction, and you can't carry forward to increase it. If Sarah from the example above had flexibly accessed her pension in 2024/25, her annual allowance from 2024/25 onwards would be GBP 4,000, not GBP 60,000 -- and she'd be unable to carry forward GBP 25,000 of unused allowance to 2026/27.

Calculating Carry Forward on Your Tax Return

If you exceed your annual allowance (including carry forward), you'll need to declare this on your Self-Assessment tax return. The process is:

1. Calculate total pension inputs for the year (employer contributions, your own contributions, and any deemed growth in defined benefit schemes).
2. Determine available allowance (GBP 60,000 plus any carried-forward unused allowance from previous years).
3. Calculate excess: Total inputs minus available allowance.
4. Pay the charge: 40% (or the amount over the higher rate threshold if you're a basic-rate taxpayer, which is more complex).

The excess charge is normally paid through self-assessment, due by 31 January after the tax year ends. So for 2026/27, the tax return would be due by 31 January 2028, and the charge would be due then.

Employer Contributions and Carry Forward

Employer contributions count toward your annual allowance, even if you don't choose them. If your employer makes a GBP 50,000 contribution to your pension and you contribute GBP 20,000 yourself, that's GBP 70,000 of "pension inputs" for the year. With an AA of GBP 60,000, you'd have GBP 10,000 excess (unless you have carry forward available).

Some employers offer optional salary sacrifice contributions, which give you a choice about how much the employer contributes to your pension. If you anticipate exceeding your AA, you can reduce the employer contribution to stay within the limit.

Carry Forward Example with Defined Benefit Pension

Carry forward applies equally to defined benefit and defined contribution pensions. For DB schemes, the "input" each year is calculated as 16 times the increase in your annual pension entitlement, plus any lump sum increased.

For example:

• 2025/26: Your final salary pension increases your annual pension entitlement by GBP 3,000 (due to a pay rise and service). The input is 16 × GBP 3,000 = GBP 48,000. AA = GBP 60,000. Unused allowance: GBP 12,000 carries forward.
• 2026/27: Your pension entitlement increases by another GBP 2,500. Input is 16 × GBP 2,500 = GBP 40,000. Available AA: GBP 60,000 + GBP 12,000 = GBP 72,000. You're well within the limit.

However, if your final salary scheme is in "surplus closure" or you're not actively accruing (you've stopped building additional pension), there may be no input at all in a year, meaning carry forward isn't necessary.

Carry Forward with Multiple Pensions

You can have multiple registered pensions (a workplace scheme, a SIPP, a LISA, etc.). Carry forward is calculated on your total pension inputs across all schemes. If you exceed the AA, you'd declare the excess on your tax return, and HMRC will assess the charge across all your pensions.

However, only the excess amount is subject to charge -- you don't lose the benefit of multiple schemes.

Carry Forward and Tax-Free Lump Sum

Carry forward doesn't affect your right to take a tax-free lump sum from your pension (up to 25% of the pot value). The lump sum is taken from already-accumulated pension savings, not from current contributions, so it doesn't use up any of your AA.

Planning Strategies with Carry Forward

Carry forward is valuable for smoothing income:

1. Low-income years: If you expect a difficult year (maternity leave, sabbatical, business downturn), you can reduce pension contributions and save carry-forward allowance.
2. High-income years: In a banner year, you can use carry forward to absorb a larger contribution without an excess charge.
3. Business owner planning: If your business profits are lumpy, use carry forward to average contributions across good and bad years.
4. Employer contribution timing: Talk to your employer about spreading employer contributions across months or varying them based on performance, to manage the AA more flexibly.

How to Declare Carry Forward to HMRC

If you're in Self-Assessment, you'll declare the excess charge (if any) on your tax return in the "Additional Information" pages. You'll be asked to detail:

• Total pension inputs for the year
• Annual allowance available (including carry forward)
• Excess amount and the charge due (40%)

If you're not in Self-Assessment (because you don't have self-employment income or other taxable sources), your pension provider or employer should notify HMRC of any excess on your behalf. However, it's wise to keep records yourself.

For defined contribution scheme members, some providers (like Fidelity, Interactive Investor, etc.) will calculate carry forward for you if you ask, and they can issue statements showing your available allowance each year.

Key Takeaways

• The annual allowance is GBP 60,000 in 2026/27. Carry forward allows you to add unused allowance from the previous 3 years.
• You must have been a scheme member in any year you're carrying forward from, but not necessarily the same scheme.
• Carry forward is applied chronologically (oldest unused allowance first) unless you opt otherwise.
• Exceed the allowance and you pay 40% charge on the excess amount.
• The MPAA (GBP 4,000) applies if you've flexibly accessed your DC pension, and carry forward doesn't increase this limit.
• Carry forward is declared on your tax return if you exceed the AA, due by 31 January after the tax year ends.

More Information

For detailed guidance on pension contributions and annual allowance, visit gov.uk/guidance/pensions-and-tax-how-to-pay-into-pensions or use HMRC's Annual Allowance Tool (AAT) if you have a DB scheme.

to explore the impact of contributions on your tax position, or review our full pension carry-forward guide for more information on lifetime allowance, pension drawdown, and tax relief on contributions.