The pension annual allowance tax charge is income tax on pension saving over your allowance, at your own rates. How it is worked out, paid and avoided.

This page sets out, in general terms, how HMRC works out the bill, how carry forward can cancel it, and the two ways to pay. For a view on your own position, the form on this page passes a short enquiry to an FCA-authorised adviser, at no cost to you.

Nothing here is personal tax advice. Which allowance applies, and what you owe, turns on your income and on every pension you pay into; an accountant or an FCA-authorised adviser is the person to confirm the figures.

What the annual allowance charge is

The charge falls on whatever you save, across all your pensions together, above your annual allowance for the tax year (6 April to 5 April). The standard allowance on GOV.UK's annual allowance page, checked on 18 October 2026 and so for the 2026/27 tax year, is £60,000. What the charge does, in HMRC's words, is "reduce tax relief on any pension saving over the annual allowance": relief still goes in on the way, and the charge takes some or all of it back.

Saving is measured gross. For a defined contribution pot, GOV.UK's guidance counts "the total contributions, including any tax relief, made by you or a third party (like your employer) in a tax year", so the employer's payments and the relief top-up both count, not just what leaves your bank account. How relief is added is in pension tax relief and relief at source, net pay and salary sacrifice compared; the allowance itself is in the pension annual allowance.

A defined benefit (final salary) scheme is tested on the growth in the value of the promised benefits over the year, not on contributions; GOV.UK says that if the value fell "your pension savings will be nil". The valuation has several steps and is set out in the defined benefit annual allowance guide.

How much is the annual allowance tax charge?

There is no single rate. HMRC's internal manual on pension tax says: "The annual allowance charge is not at a fixed rate but will depend on how much taxable income the individual has and the amount of their pension saving in excess of the annual allowance." GOV.UK says the excess "is added to your taxable income and you will pay Income Tax on it, at the tax rate that applies to you". In other words, the excess is taxed as the top slice of your income.

For people who are not Scottish taxpayers, the manual says the charge "can be in whole or in part at 45 per cent, 40 per cent or 20 per cent, depending on the individual’s taxable income and the amount of their pension savings that are in excess of the annual allowance." Scottish taxpayers are treated in the same way, "except that the rates and the points at which they apply can differ". The excess is "the total pension input amount for the tax year, less the annual allowance for that year, less any unused annual allowance carried forward from earlier years."

HMRC's own illustration has a person it calls Frances with "an excess amount of £30,000" and "£140,000 income that she has to pay tax on". Using the manual's example limits, her excess splits as "£20,000 @ 45 per cent = £9,000" and "£10,000 @ 40 per cent = £4,000", so "Frances’s annual allowance tax charge is £13,000." That shows the method, not what anyone else would pay. On a return filed online, the manual says, the amount "will be worked out automatically".

Which annual allowance applies to you?

GOV.UK says the £60,000 figure can be lower for people who have "flexibly accessed your pension pot" or have "a high income". The charge is then measured against the lower figure.

Tapered allowance. On a high income the allowance can be reduced, to a minimum of £10,000 in 2026/27. The test and the method are in how the tapered annual allowance works, with employer contributions and adjusted net income and salary sacrifice covered separately.

Money purchase annual allowance. The manual puts the money purchase annual allowance at £10,000 from tax year 2023-24 onwards. GOV.UK says it can apply if you take, for example, cash or a short-term annuity from a flexi-access drawdown fund, or cash from a pension pot (an uncrystallised funds pension lump sum), and that you have gone above it "if you’ve paid over £10,000 into all of your defined contribution pensions" after first flexibly accessing (see how much pension drawdown to take). The full list of triggers is in the money purchase annual allowance guide and weighed in annuity or drawdown. One point matters for the charge: "You cannot use unused allowances from previous tax years to reduce the amount you’ve gone above the money purchase annual allowance by."

How to avoid the annual allowance charge

The main way HMRC describes is carry forward. GOV.UK says: "You will not be taxed on pension savings over your annual allowance if you have enough unused annual allowance from previous years to carry forward. You can carry forward unused allowance from the 3 previous tax years." In the manual's words, unused allowance is "added to the current year’s annual allowance". The mechanics, and the conditions such as having been a member of a registered scheme in the earlier year, are in how pension carry forward works.

Check the figures before the return. HMRC's manual (PTM167100) says a scheme must send a pension savings statement automatically where your saving in that scheme alone is over the standard annual allowance (the taper is ignored), or where it believes you have flexibly accessed a pension and your money purchase saving there is over £10,000. It "should be given to the individual by 6 October following the end of the relevant tax year", with later deadlines in some cases. Someone who is tapered, or whose saving is spread over several schemes, may get none, but GOV.UK says: "You can ask each of your pension providers for details of your pension savings for each scheme if they’ve not already sent them to you." The manual adds that a statement for the previous three tax years can be requested where carry forward may be needed.

Narrow exceptions. PTM051200 names three situations in which some or all saving escapes the charge: the individual "dies", "retires due to severe ill-health" or "is a deferred member whose benefits do not increase beyond certain levels". Each has tight conditions, so they are not a plan.

Several years of statements, with taper or flexible access in the mix, is a lot to untangle alone. If you would value an FCA-authorised adviser going through them, the form on this page can arrange that introduction.

How do you pay the annual allowance charge?

GOV.UK says: "If you go over your annual allowance, either you or your pension provider must pay the tax." Either way it is reported on a return: "Fill in the ‘Pension savings tax charges’ section of a Self Assessment tax return to tell HMRC about the tax, even if your pension provider pays all or part of it."

Self Assessment. This is the normal route: the individual pays the charge and accounts for it on the return, which the manual says "should be submitted at the latest by 31 January of the year following that in which the tax year ended". If scheme figures are not ready, "they should use an estimate of their pension input amount", note that on the return, and amend it "within 12 months of the statutory filing date"; if the estimate was lower than the final figure the individual "will need to pay any additional tax due along with any interest on the late payment of the tax."

Scheme Pays. The manual says that from 11 August 2011 an individual may elect to require the scheme administrator "to pay some or all of their annual allowance charge liability on their behalf in return for an appropriate reduction in their pension benefits." It sets two conditions, both needed: "their annual allowance charge liability for the tax year has exceeded £2,000", and their saving in that scheme for the year is over the standard annual allowance in section 228 Finance Act 2004, with the tapered allowance and the MPAA ignored for this test. With more than one scheme the test is scheme by scheme, and the member can ask for part only: "They can ask the scheme to pay part of the amount and then the member would pay the difference direct to HMRC." If the charge arises by reference to the money purchase annual allowance, the individual "cannot elect to notify the scheme administrator unless the individual’s annual allowance charge liability by reference to the annual allowance would have exceeded £2,000."

Deadline. "The member must give a ‘Scheme Pays’ notice by 31 July in the year following the year in which the tax year to which the annual allowance charge relates ended." The manual's example is "no later than 31 July 2024" for the 2022 to 2023 tax year, and the member "cannot notify the scheme that they wish to use ‘Scheme Pays’ before the end of the tax year in which the annual allowance charge arises." The deadline is brought forward when the member is due to become entitled to all their benefits, and extended in some cases. Once a valid notice is received the scheme becomes "jointly and severally liable to the annual allowance charge with the member", and the member still includes the amount on their return. Each scheme can say what form it uses and its cut-off date.

Annual allowance charge questions

What happens if I pay too much into my pension?

Two separate limits can bite. Over the annual allowance, relief is still claimed as normal and the charge then claws it back: HMRC says it "will offset some or all of this relief". Relief itself also stops at "100% of your earnings in a year", a different test explained in pension tax relief.

Do I have to put an annual allowance charge on my tax return?

Yes, if there is a charge. HMRC's manual says nothing needs reporting if saving is within the allowance, or over it but fully covered by carry forward. The exception is the MPAA: someone it applies to can owe a charge, and have to report it, while still under their available annual allowance.

What if the scheme will not pay the charge for me?

Without a valid Scheme Pays notice the charge stays with you, through Self Assessment. A scheme can agree to pay voluntarily, but the liability remains yours until paid, and if the scheme misses the time limits you "may incur interest and penalties", HMRC says.

Is there an annual allowance charge calculator?

Yes. GOV.UK says "You can also use a calculator to work out how much you’ve gone above the allowance", and its carry forward guidance links one. That guidance says the calculator cannot be used for a scheme with "aspects of both defined benefit and defined contribution schemes", among other cases.

The next step

Whether you are over the allowance, how much carry forward is open to you and whether Scheme Pays is available depend on your own pensions and income. Your single next step is the form on this page: a few questions, nothing to pay, after which an FCA-authorised adviser may review your statements and tax position with you. An accountant is another route, and your scheme can say what it needs for a Scheme Pays notice.

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