Pension annual allowance in the UK: how much you can save each year with tax relief

The UK rewards pension saving with tax relief: in effect, the tax you paid on money you put into a pension is given back. But that relief has a yearly ceiling — the annual allowance. Anyone saving into a pension through work or on their own should understand how it works. Here is the picture from gov.uk.

What is the current limit?

This tax year the annual allowance is £60,000. That is the most you can put into all your pension pots in a year while getting tax relief. The UK tax year runs not from January but from 6 April to 5 April the following year, and the limit is measured over that period.

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What counts towards it?

The allowance includes not only your own contributions but what your employer adds, and in defined-benefit schemes the calculated growth in your future entitlement. If you put in less than the limit in a year, the unused part is not simply lost.

Can you carry unused allowance forward?

Yes. If you do not use all of this year's allowance, you can usually carry the unused part forward from the previous three tax years. This helps when you make a large contribution in one year — say after selling a business or getting a bonus. To carry forward, you must have been a member of a pension scheme in those earlier years, even if you paid nothing in. This year's allowance is used first, then the unused amounts from earlier years, starting with the oldest.

Who has a smaller limit?

For high earners the allowance is reduced — the tapered annual allowance. It applies if your "threshold income" is over £200,000 and your "adjusted income" (including pension contributions) is over £260,000. The higher your income above those points, the less allowance remains. Earlier years used different thresholds.

What if you have started taking your pension?

If you have already flexibly accessed a defined-contribution pension (for example taken more than the tax-free part), a separate, lower limit applies to further contributions — the money purchase annual allowance. It matters for those who keep working and saving after starting to draw a pension.

What happens if you exceed it?

If you put in more than your allowance (including carry forward), a tax charge applies to the excess — effectively removing the relief. So before a large contribution it is worth checking your limit, and in complex cases (high income, several schemes, pensions already in payment) getting advice. The exact rules and calculators are on gov.uk.