Earn a lot and your GBP 60,000 pension allowance can shrink to as little as GBP 10,000. Here is exactly how the taper works in 2025/26, with the two income tests that decide whether it bites.
For most people the pension annual allowance is a generous GBP 60,000. For high earners it can be a fraction of that. The tapered annual allowance is HMRC's mechanism for clawing back pension tax relief from the highest earners, and because it relies on two different income definitions that almost nobody calculates correctly off the cuff, it is one of the most error-prone areas in personal tax. Get it wrong and you face an annual allowance charge; understand it and you can often protect the full allowance with the right planning.
This page builds on the standard pension annual allowance guide; if you are not already familiar with the basic GBP 60,000 limit, start there. The taper modifies that figure for high earners, and the pension planner calculator can help you see how a contribution interacts with your particular income level.
The taper is governed by two separate income figures. You must breach both before any reduction applies. This double gateway is the single most important thing to understand, because it means many high earners escape the taper entirely.
| Test | 2025/26 limit | Broadly includes | Broadly excludes |
|---|---|---|---|
| Threshold income | GBP 200,000 | Total taxable income | Your own gross pension contributions |
| Adjusted income | GBP 260,000 | Total taxable income plus ALL pension contributions | Nothing pension-related |
If your threshold income is GBP 200,000 or below, you keep the full GBP 60,000 allowance, full stop, no matter how high your adjusted income climbs. Only once threshold income passes GBP 200,000 does the adjusted income test come into play.
Once both gateways are breached, the reduction is mechanical: your GBP 60,000 allowance falls by GBP 1 for every GBP 2 of adjusted income above GBP 260,000.
| Adjusted income | Excess over GBP 260,000 | Reduction (half the excess) | Tapered allowance |
|---|---|---|---|
| GBP 260,000 | GBP 0 | GBP 0 | GBP 60,000 |
| GBP 280,000 | GBP 20,000 | GBP 10,000 | GBP 50,000 |
| GBP 300,000 | GBP 40,000 | GBP 20,000 | GBP 40,000 |
| GBP 340,000 | GBP 80,000 | GBP 40,000 | GBP 20,000 |
| GBP 360,000+ | GBP 100,000+ | GBP 50,000 (capped) | GBP 10,000 |
Your salary and bonus total GBP 240,000, and your employer pays GBP 40,000 into your pension. Let's run both tests.
The GBP 40,000 employer contribution fits within the GBP 50,000 tapered allowance, so no charge arises this year. But it is a close call, and a larger bonus next year could change the picture.
Your taxable income is GBP 195,000 and your employer adds GBP 30,000 to your pension. Your adjusted income is GBP 225,000, but your threshold income is only GBP 195,000, below GBP 200,000. Because the first gateway is not breached, the taper does not apply at all. You keep the full GBP 60,000 allowance despite the large employer contribution. This is exactly why the threshold income test matters so much: it can shield you entirely.
Because passing the threshold income test protects the full GBP 60,000 allowance, the most effective planning lever for many high earners is to keep threshold income at or below GBP 200,000. Personal pension contributions reduce threshold income, so a larger personal contribution can, counter-intuitively, restore a bigger allowance than you started with. Gift Aid donations also reduce threshold income.
This is delicate territory. Overshoot and you waste relief; undershoot and you trigger a charge. The pension planner is a useful starting point, but anyone close to the thresholds should consider regulated financial advice, because the calculations interact with bonuses, benefits in kind and the timing of contributions.
A tapered high earner can still use carry forward from the previous three tax years, which is often the only way to make a worthwhile contribution. The catch: the allowance you carry forward from a prior year is that year's allowance as it applied to you, including any taper that bit in that year. So if you were tapered to GBP 30,000 two years ago and only paid in GBP 10,000, you carry forward GBP 20,000, not the difference from a full GBP 60,000. The detailed mechanics are covered in the carry forward guide.
If your total pension input exceeds your tapered allowance plus any carry forward, the excess faces an annual allowance charge, taxed at your marginal rate and reported through Self Assessment. For high earners that marginal rate is typically 45 percent (or 48 percent in Scotland at the top rate), so the charge can be substantial. Where it is GBP 2,000 or more, scheme pays may be available to settle it from the pension itself.
The taper has two doors, and you only get caught if you walk through both. Keep your threshold income under GBP 200,000 and the full GBP 60,000 is yours, no matter how big the employer contribution.
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