For the 2026/27 tax year, the standard pension Annual Allowance is £60,000. However, higher earners can see this reduced under the tapered annual allowance rules.
The taper only applies where both of the following conditions are met:
Threshold income exceeds £200,000
Adjusted income exceeds £260,000
Threshold Income
Threshold income is broadly your taxable income after deducting certain personal pension contributions.
Its purpose is to determine whether you enter the taper at all.
For example, if someone has taxable income of £215,000 and makes a £20,000 gross personal pension contribution:
£215,000 − £20,000 = £195,000 threshold income
As this is below £200,000, the tapered annual allowance would not normally apply.
Adjusted Income
Adjusted income broadly adds pension funding back in, including employer pension contributions.
Once adjusted income exceeds £260,000, the Annual Allowance is reduced by:
£1 for every £2 of adjusted income above £260,000.
For example, if adjusted income is £300,000:
£300,000 − £260,000 = £40,000 excess
£40,000 ÷ 2 = £20,000 reduction
£60,000 − £20,000 = £40,000 Annual Allowance
The Minimum Annual Allowance
The tapered Annual Allowance cannot fall below £10,000.
This minimum is reached once adjusted income reaches £360,000.
The Key Numbers
For practical purposes, the figures to remember are:
£200,000 – Threshold income limit
£260,000 – Adjusted income taper starts
£1 for every £2 – Rate of taper
£10,000 – Minimum Annual Allowance
£360,000 – Adjusted income at which the minimum is reached
A useful way to remember the distinction is:
Threshold income determines whether the taper applies. Adjusted income determines how much the Annual Allowance is reduced.
Carry forward may also allow unused Annual Allowance from the previous three tax years to be used, subject to the usual rules.