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The Tapered Annual Allowance in 2026/27
The £200,000 and £260,000 triggers, the £10,000 floor, and the contribution that can switch the taper off
Tapered Annual Allowance · 2026/27
Is the taper cutting your pension allowance?
The full input set, matching the calculation advisers use. Enter what applies and leave the rest at zero. The result shows threshold income, adjusted income and what is left of your £60,000 allowance.
Your position
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Illustrative only, not financial advice. Uses the confirmed 2026/27 rules. The £60,000 annual allowance tapers by £1 for every £2 of adjusted income above £260,000, down to a floor of £10,000. It applies only where threshold income also exceeds £200,000. Threshold income is approximated here as taxable income minus your gross personal contributions. Adjusted income is taxable income plus employer contributions. Salary sacrifice you tell us about is added back when working out threshold income, which is what the statutory rules require for arrangements set up after 8 July 2015. The statutory definitions carry further adjustments not modelled here, including lump sum death benefits. They also cover defined benefit accrual, which counts as employer input. Contributions above the allowance may be covered by carry forward from the previous three tax years before any charge arises. Check your position with us before the tax year ends, the first conversation is free.
The figures first, then the planning
The standard pension annual allowance is £60,000. For higher earners it tapers away. The taper applies when threshold income is over £200,000 and adjusted income is over £260,000. Above £260,000 of adjusted income, you lose £1 of allowance for every £2 of income. The floor is £10,000, reached at £360,000 of adjusted income.
Two income measures decide it. Threshold income is broadly your total taxable income minus your own gross pension contributions. Adjusted income is broadly your total taxable income plus employer pension contributions.
Your own contributions reduce threshold income. That creates one genuine off switch. A large enough personal contribution can bring you to the £200,000 line. It can also restore the full £60,000 allowance in the same year.
For owner-directors weighing salary, dividends and company pension contributions, that interaction is usually worth more than any other allowance planning. The same applies to employees considering bonus sacrifice.
Exceeding your allowance does not always mean a tax charge. Carry forward lets you use unused allowance from the previous three tax years first. You must have been a pension scheme member in those years. If a charge does arise, it is levied at your marginal rate. This effectively claws back the tax relief rather than fining you. The order of operations matters. That is why we check the taper before recommending any large contribution. We cover this in our wider work on saving tax with pensions.
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Two tests, both required
Threshold income over £200,000 AND adjusted income over £260,000. Miss either test and the full £60,000 allowance stands, which is why the calculation is worth doing before assuming the taper applies to you.
The off switch
Personal contributions reduce threshold income. Contribute enough to reach the £200,000 line and the taper switches off entirely, same year, full £60,000 restored. It is the one allowance rule that rewards paying more in.
Pension carry forward
Up to three previous years of unused allowance can cover contributions above this year's allowance before any charge arises. High earners with irregular income, bonuses, dividends, business sales, often have more headroom than they think.
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Questions high earners ask about the taper
What is threshold income and adjusted income?
Threshold income is broadly all your taxable income, salary, bonus, dividends, rental, interest, minus your own gross pension contributions. Adjusted income is all your taxable income plus employer pension contributions (including the value of defined benefit accrual). The taper only applies if threshold income exceeds £200,000 and adjusted income exceeds £260,000. The statutory definitions add further adjustments. These cover salary sacrifice arrangements set up after 8 July 2015, and certain lump sum death benefits.
What is the minimum tapered annual allowance for 2026/27?
£10,000. The £60,000 allowance reduces by £1 for every £2 of adjusted income above £260,000. It reaches the £10,000 floor once adjusted income hits £360,000. It reduces no further beyond that. The £10,000 floor is the same figure as the Money Purchase Annual Allowance. It arises under a different rule. You can be caught by both.
How does carry forward work with the tapered annual allowance?
You can carry forward unused annual allowance from the previous three tax years. You must have been a member of a registered pension scheme in each year you carry from. For tapered years, you carry forward the unused part of that year's tapered allowance. You do not carry forward the standard £60,000. Current-year allowance is used first, then the earliest of the three years. For high earners with variable income, a proper carry-forward calculation can turn an apparent excess into no charge at all.
What happens if I exceed my annual allowance?
An annual allowance charge applies to the excess at your marginal rate of income tax. It removes the tax relief rather than adding a penalty on top. It is declared through self-assessment. Where the charge exceeds £2,000 you can often elect for 'scheme pays'. Your pension scheme then settles the charge from the fund, instead of you paying it in cash.
Can I avoid the taper by paying more into my pension?
Sometimes, and it is the planning point most people miss. Personal contributions reduce threshold income. If a contribution brings your threshold income to £200,000 or below, the taper switches off. The full £60,000 allowance is then restored for that year. It only works within the tax year. It also interacts with carry forward. For owner-directors, it competes with employer-contribution routes. That is exactly the calculation to do with a planner before the year end.
Reviewed by
BSc, MLIBF, PETR, Chartered ALIBF · Co-Founder and Chartered Associate
Chris has spent over a decade in financial planning and specialises in research and technical analysis. He checks every figure and calculation on this page before it is published.
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