Tapered annual allowance
Allowance = max[£10,000, £60,000 − (adjusted income − £260,000) ÷ 2]The formula applies only when threshold income is above £200,000 and adjusted income is above £260,000.
Pension Allowance & Carry-Forward · Methodology
How the calculation works
Build an illustrative four-year UK pension annual-allowance ledger for 2026/27, including tapering, carry-forward, the Money Purchase Annual Allowance and the separate relevant-earnings limit for personal contribution tax relief.
Return to calculatorIncluded
- The 2026/27 standard and tapered annual allowance
- Registered-scheme membership in each carry-forward year
- Prior pension input for 2023/24 to 2025/26
- Oldest-first use of unused annual allowance
- Personal and employer defined-contribution input
- Defined-benefit and other pension input
- The £10,000 Money Purchase Annual Allowance
- HMRC default and alternative MPAA methods
- Personal relevant-earnings capacity
- A rough annual-allowance charge estimate
Outside this method
- A full threshold-income or adjusted-income calculation
- Automatic extraction of pension input statements
- Defined-benefit input calculation
- Pension input period changes
- Split tax years or overseas pension input
- Scheme Pays eligibility and deadlines
- Tax-return completion
- Advice on whether or when to contribute
Calculation
Core formulas
Prior unused allowance
Unused = max(0, usable allowance − total pension input)No carry-forward is created when registered-scheme membership is not selected. If the MPAA applied, the alternative annual allowance is used for this estimate.
Default chargeable amount
max(0, total current input − current annual allowance − prior carry-forward)Current allowance is used before prior years, which are consumed oldest first.
MPAA alternative chargeable amount
DC input above £10,000 + other input above alternative allowance and carry-forwardAlternative allowance is the current tapered or standard allowance minus £10,000. Unused MPAA cannot be carried forward.
MPAA result
Chargeable excess = max(default method, alternative method)HMRC requires the higher chargeable amount where the MPAA applies.
Personal tax-relief limit
max(£3,600, relevant UK earnings)This separate gross personal-contribution limit does not cap employer contributions.
Timing convention
When cash flows occur
The model uses the current 2026/27 allowance first and then 2023/24, 2024/25 and 2025/26 unused amounts in that order. All entered input is assumed to fall within the stated tax year's pension input period. The expiry marker assumes no later correction to historic pension input.
Limitations
What the result cannot establish
- Threshold income and adjusted income are accepted as user inputs because their statutory calculations can differ from taxable pay.
- Prior-year MPAA carry-forward is approximated using alternative annual allowance less total pension input, consistent with the cited HMRC example; scheme-specific records govern.
- The relevant-earnings check compares only the entered personal defined-contribution input and does not establish whether a scheme can accept a contribution.
- The charge estimate cannot account for the way an annual-allowance excess is added across actual Income Tax bands.
- Historic annual allowance can be affected by pension input corrections, flexible-access dates and scheme events not represented here.
- Anyone near a limit should obtain official input statements and professional tax advice before a large contribution.
Reference tests
Numerical checks
| Case | Inputs | Expected result |
|---|---|---|
| No taper | Threshold income £200,000; adjusted income £300,000 | £60,000 annual allowance because both tests are not exceeded |
| Tapered allowance | Threshold income £250,000; adjusted income £300,000 | £40,000 annual allowance |
| Taper floor | Threshold income £300,000; adjusted income £400,000 | £10,000 annual allowance |
| Oldest-first carry-forward | £80,000 current input; £60,000 current allowance; £10,000 unused in each prior year | £10,000 used from 2023/24 and £10,000 from 2024/25 |
| MPAA excess | MPAA applies; £15,000 current DC input; otherwise ample carry-forward | At least £5,000 chargeable under the alternative method |
Evidence