Tapered Annual Allowance 2026/27
High Earner Pension Limits
Earn a lot and your £60,000 pension allowance can shrink to as little as £10,000. Here is exactly how the taper works in 2026/27, with the two income tests that decide whether it bites.
For most people the pension annual allowance is a generous £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.
- Tapered Annual Allowance
- A reduction to the £60,000 pension annual allowance for high earners. For every £2 of adjusted income above £260,000, the allowance falls by £1, down to a minimum of £10,000 in 2026/27. It only applies if both threshold income exceeds £200,000 and adjusted income exceeds £260,000.
This page builds on the standard pension annual allowance guide; if you are not already familiar with the basic £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 only bites if BOTH your threshold income exceeds £200,000 AND your adjusted income exceeds £260,000.
- Above £260,000 of adjusted income, your allowance drops by £1 for every £2 over, to a £10,000 floor reached at £360,000.
- Threshold income broadly excludes your own pension contributions; adjusted income adds back all contributions, including your employer's.
- Keeping threshold income at £200,000 or below protects your full £60,000 allowance regardless of adjusted income.
The Two Income Tests for 2026/27
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 | 2026/27 limit | Broadly includes | Broadly excludes |
|---|---|---|---|
| Threshold income | £200,000 | Total taxable income | Your own gross pension contributions |
| Adjusted income | £260,000 | Total taxable income plus ALL pension contributions | Nothing pension-related |
If your threshold income is £200,000 or below, you keep the full £60,000 allowance, full stop, no matter how high your adjusted income climbs. Only once threshold income passes £200,000 does the adjusted income test come into play.
How the Taper Is Calculated
Once both gateways are breached, the reduction is mechanical: your £60,000 allowance falls by £1 for every £2 of adjusted income above £260,000.
- Adjusted income of £280,000 is £20,000 over the limit, so the allowance reduces by £10,000, leaving £50,000.
- Adjusted income of £310,000 is £50,000 over, reducing the allowance by £25,000, leaving £35,000.
- Adjusted income of £360,000 or more reaches the £10,000 minimum, and the allowance does not fall further.
| Adjusted income | Excess over £260,000 | Reduction (half the excess) | Tapered allowance |
|---|---|---|---|
| £260,000 | £0 | £0 | £60,000 |
| £280,000 | £20,000 | £10,000 | £50,000 |
| £300,000 | £40,000 | £20,000 | £40,000 |
| £340,000 | £80,000 | £40,000 | £20,000 |
| £360,000+ | £100,000+ | £50,000 (capped) | £10,000 |
If you are a director earning £240,000 with a large employer contribution
Your salary and bonus total £240,000, and your employer pays £40,000 into your pension. Let's run both tests.
- Threshold income: roughly £240,000 (your taxable income, with no personal pension contributions to deduct). This exceeds £200,000, so the first gateway is open.
- Adjusted income: £240,000 plus the £40,000 employer contribution = £280,000. This exceeds £260,000 by £20,000.
- Reduction: half of £20,000 = £10,000.
- Tapered allowance: £60,000 minus £10,000 = £50,000.
The £40,000 employer contribution fits within the £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.
If you are a consultant earning £195,000 with employer pension top-ups
Your taxable income is £195,000 and your employer adds £30,000 to your pension. Your adjusted income is £225,000, but your threshold income is only £195,000, below £200,000. Because the first gateway is not breached, the taper does not apply at all. You keep the full £60,000 allowance despite the large employer contribution. This is exactly why the threshold income test matters so much: it can shield you entirely.
Why Threshold Income Is Your Best Defence
Because passing the threshold income test protects the full £60,000 allowance, the most effective planning lever for many high earners is to keep threshold income at or below £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.
Carry Forward Still Works, With a Twist
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 £30,000 two years ago and only paid in £10,000, you carry forward £20,000, not the difference from a full £60,000. The detailed mechanics are covered in the carry forward guide.
What Happens If You Exceed Your Tapered Allowance
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 £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 £200,000 and the full £60,000 is yours, no matter how big the employer contribution.
People also ask
Frequently asked questions
- What is the difference between threshold income and adjusted income?
- They are two separate tests, and you only suffer the taper if you fail both. Threshold income is broadly your total taxable income less your own gross pension contributions, with a limit of £200,000. Adjusted income is your total taxable income plus the value of all pension contributions, including employer ones, with a limit of £260,000. If your threshold income is £200,000 or below, you keep the full £60,000 allowance regardless of adjusted income. Both gateways must be exceeded for the taper to apply.
- How low can the tapered annual allowance go?
- For 2026/27 the minimum tapered annual allowance is £10,000. The taper reduces your allowance by £1 for every £2 of adjusted income above £260,000, so the £50,000 of taper is fully used once adjusted income reaches £360,000. Above £360,000 of adjusted income your allowance stays at the £10,000 floor and does not reduce further. The minimum was raised from £4,000 to £10,000 in April 2023.
- Can high earners still use carry forward with a tapered allowance?
- Yes. You can carry forward unused allowance from the previous three tax years even if you are subject to the taper now. Importantly, the amount you can carry forward from a prior year is that year's tapered allowance for you, not the full standard allowance, if you were tapered in that year too. Carry forward is often the only way a tapered high earner can make a meaningful pension contribution, so checking the three prior years is essential before contributing.
- Do employer pension contributions count towards the taper?
- Yes, and this catches many high earners out. Employer contributions are excluded from threshold income but are added back into adjusted income. So a large employer contribution can push you over the £260,000 adjusted income limit even if your threshold income is well below £200,000. However, because threshold income must also exceed £200,000 for the taper to apply, an employer contribution alone cannot trigger the taper if your threshold income is £200,000 or less.
- How do I avoid the tapered annual allowance?
- The most reliable route is to keep your threshold income at £200,000 or below, because that single test, if passed, protects your full £60,000 allowance no matter how high your adjusted income. Personal pension contributions reduce threshold income, so making a larger personal contribution can paradoxically restore your allowance. Other tactics include charitable Gift Aid donations and, for some, taking income as employer pension contributions. Specialist advice is worth taking before acting, as the interactions are intricate.
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