The pension annual allowance taper takes £1 off a high earner's allowance for each £2 of adjusted income above £260,000 in 2026/27, down to £10,000.
It applies only when two measures of your income are both over their limits, and each test is worked out from your own tax figures and pension statements rather than from your salary alone. An FCA-authorised adviser can line those inputs up with you, and the form here sets up a free call-back. Nothing below is a calculation of your own tax.
When does the pension annual allowance taper?
The allowance is reduced only when your threshold income is above £200,000 and your adjusted income is above £260,000. GOV.UK's annual allowance page puts it as a reduced ('tapered') allowance "if both" of those are over their limits, and HMRC's Pensions Tax Manual adds that if threshold income is not more than £200,000 "there is no need to calculate the amount of their adjusted income as the tapered annual allowance cannot apply". The limits are those in HMRC's published rates for 2026 to 2027, and the table below shows how they differed in earlier years.
That makes threshold income the gate and adjusted income the measure. Someone whose threshold income is £200,000 or less keeps the standard allowance however large their adjusted income is. Your allowance across all your private pensions together is the subject of the annual allowance guide.
Pension annual allowance taper threshold and adjusted income limits by tax year
HMRC's pension schemes rates page says the allowance has been reduced for higher incomes "from 6 April 2016", and lists the limits and the lowest the allowance can fall for each year:
| Tax year | Threshold income limit | Adjusted income limit | Minimum tapered allowance |
|---|---|---|---|
| 2023 to 2024 up to and including 2026 to 2027 | £200,000 | £260,000 | £10,000 |
| 2020 to 2021 up to and including 2022 to 2023 | £200,000 | £240,000 | £4,000 |
| 2016 to 2017 up to and including 2019 to 2020 | £110,000 | £150,000 | £10,000 |
(HMRC, pension schemes rates, accessed 21 October 2026.) The standard allowance being reduced is £60,000 in each year from 2023 to 2024 to 2026 to 2027, and was £40,000 in each year from 2016 to 2017 to 2022 to 2023. GOV.UK says the current limits differ from those for "tax years up to and including 2022 to 2023", so check the year you are looking at, especially when working back through old statements.
How much does the annual allowance reduce?
It falls by £1 for every £2 of adjusted income above the limit. GOV.UK's wording, written for the current tax year, is "For every £2 your adjusted income goes over £260,000, your annual allowance for the current tax year reduces by £1", and "The minimum reduced annual allowance you can have in the current tax year is £10,000." HMRC's manual adds that a reduction that is not a whole number of pounds is rounded down to the nearest £1.
The examples below use old figures, not current ones. HMRC's worked examples at PTM057200 assume a £40,000 standard allowance, a £150,000 adjusted income limit and a £10,000 floor, which the rates table above gives for 2016 to 2017 up to and including 2019 to 2020. They show the method only. For 2026 to 2027 the adjusted income limit is £260,000 and the standard allowance £60,000, so the sums cannot be copied across to a current year.
- Adjusted income £160,000 (2016-17 to 2019-20 rules): "a reduced annual allowance of £35,000", because the £10,000 over the limit creates a reduction of £5,000.
- Adjusted income £215,000 (same old rules): "a reduced annual allowance of £10,000", because the £65,000 over the limit creates a £32,500 reduction that "would otherwise have reduced the annual allowance to below £10,000".
Once you have a figure, what happens if your savings exceed it is covered in the annual allowance tax charge guide. Why the same band of income can feel like a very steep tax rate is the subject of the guide to effective relief rates at higher incomes.
How do you work out threshold income?
Start from net income, which is your taxable income after reliefs but before personal allowances. HMRC's manual says it is "income chargeable to tax before any account is taken of personal allowances, the savings allowance or the dividend nil rate", and that it can include earnings from employment and self-employment, most pension income, savings interest, dividends, rental income and trust income. Then GOV.UK's steps are:
- Deduct the gross amount of contributions to schemes where you had relief at source, whether paid by you or for you by anyone other than your employer. That usually means personal and stakeholder pensions and some workplace schemes, and the manual counts the gross figure: the amount actually paid plus the basic rate relief the scheme administrator can claim.
- Deduct any lump sum death benefits you received from registered pension schemes that are taxable as your pension income.
- Add back any reduction of your employment income through a relevant salary sacrifice or flexible remuneration arrangement made after 8 July 2015.
The salary sacrifice step matters: giving up pay for an employer contribution under a relevant arrangement does not lower threshold income. How salary sacrifice sits with the allowance itself is in its own guide. If the result is £200,000 or less, you can stop there.
Net income is a general tax concept rather than a pension one, and HMRC's manual directs people with questions about it to their financial advisers or agents. If your income mixes employment, self-employment and investments, an adviser can go through it on a call-back from the form here.
How do you work out adjusted income?
Adjusted income also starts from net income, but then adds pension saving back rather than taking it off. In GOV.UK's version you add:
- claims for tax relief on pension savings that were paid before relief was given, for example when the scheme was not set up for automatic relief or someone else paid in;
- savings made where relief was given because "your employer took them out of your pay before deducting Income Tax";
- relief claimed on savings in an overseas scheme where you received UK tax relief; and
- "the amount of pension savings your employer made for you".
You then deduct any lump sum death benefits you received from registered pension schemes. HMRC's manual explains the logic: contributions under the net pay arrangement reduce net income, "For this reason, they are added back", while relief-at-source contributions are paid after tax is calculated, so there is "no need to add these contributions back".
The effect is that your employer's contributions count towards adjusted income even though they never appear in your pay. A similarly named measure, adjusted net income, is the subject of its own guide.
Which pension savings count towards the figures?
Both incomes depend on your pension savings for the tax year, so gather the statements first. GOV.UK says each scheme may send an annual pension savings statement and, if you have not had one, "you can ask your pension administrators for it". The way savings are measured depends on the scheme type:
- Defined contribution (money purchase): usually the contributions made by you or on your behalf in the pension input period, and GOV.UK adds "This includes your employer."
- Defined benefit, including career average: the opening value deducted from the closing value for the period. If that difference is negative your savings are nil; the valuation steps are in the defined benefit input amounts guide.
Since 2016 to 2017 the pension input period has matched the tax year, 6 April to 5 April. To find the employer share GOV.UK suggests taking your total pension savings and deducting your own contributions, and anyone else's apart from your employer's.
How does the taper interact with carry forward, the money purchase allowance and the tax charge?
Three neighbouring rules change what the reduced figure means in practice:
- Carry forward. GOV.UK defines your available allowance as "your reduced annual allowance plus any unused allowance from the previous 3 tax years". HMRC's manual says the amount available to carry forward from a past year depends on whether the tapered or money purchase allowance applied to you then. The conditions and order of use are in the carry forward guide.
- Money purchase annual allowance. Flexibly accessing a pension can bring in the money purchase annual allowance rules, and then there are two limits: the money purchase allowance for money purchase savings and an "alternative" allowance for everything else. Where the taper also applies, the manual finds that alternative allowance as "Tapered annual allowance - money purchase annual allowance amount", which it says is nil from 2023-24 onwards for someone at the £10,000 minimum. See the money purchase annual allowance guide.
- The charge. GOV.UK says that if savings exceed your available allowance you should include the excess on your Self Assessment return, where it is added to taxable income. "The ‘Scheme Pays’ conditions are not affected by the tapered annual allowance," according to PTM057100: a scheme can be required to pay the charge only where your savings in that scheme are over the standard allowance, not your reduced one. Details are in the tax charge guide.
There is also an anti-avoidance rule. Arrangements whose main purpose, or one of their main purposes, is to shrink the taper by lowering threshold or adjusted income in one tax year, made up by higher income in a different year, "are disregarded for the purpose of calculating the individual's reduced annual allowance". Whether a particular way of timing income would be caught is a fair question to put to an adviser, at no charge, after a short request through the form below.
Questions about the tapered annual allowance
Do employer pension contributions count towards the taper?
Yes, in adjusted income. GOV.UK's steps add "the amount of pension savings your employer made for you", which HMRC's manual reaches by taking your total pension input amount and subtracting contributions paid by you or by anyone else other than your employer, so it counts towards the £260,000 test. Threshold income picks up employer contributions only where they replace pay given up under a relevant salary sacrifice or flexible remuneration arrangement made after 8 July 2015, and employer contributions are also part of the pension savings measured against your reduced allowance.
How do I calculate my tapered annual allowance?
Work out threshold income first, then adjusted income, then take £1 off the standard allowance for every £2 of adjusted income over the year's limit, stopping at that year's minimum. HMRC's manual works a full example for a fictional employee with a salary, self-employment and a personal pension at PTM057200, step by step. That example also assumes the 2016-17 to 2019-20 limits (£110,000 and £150,000, with a £40,000 allowance), so follow its steps but take each year's limits from the table above.
Does the taper affect people with no income, or at older ages?
The taper cannot apply unless threshold income is over £200,000, so it is a rule for high incomes only. What someone with little or no earnings can pay in with relief is answered in the guide to relief without an income, and paying in once you reach 75 in the after-75 guide.
When did the tapered annual allowance start?
HMRC's manual says it "applies from the 2016-17 tax year". The adjusted income limit has been £150,000, then £240,000, then £260,000 as the table above shows.
Can my spouse's allowance help?
The taper is worked out from each person's own threshold and adjusted income, so a reduced allowance is tied to the income of the person it applies to. Whether unused allowance can pass between spouses or civil partners is covered in its own guide.
Next step
Whether you are over the thresholds depends on figures only you and your pension schemes hold. If you would like someone to go through your statements and tax figures with you, request a call-back and talk them over, free, with an FCA-authorised adviser. Whoever you end up speaking to, look at the FCA's guide to pension scams first. For wider context, see pension tax relief and pension tax.
Sources
Pages read on 21 October 2026.