What is the annual allowance for pension contributions?
Answered 17 March 2026
Here is a comprehensive answer on the annual allowance for pension contributions.
Annual Allowance for Pension Contributions
What the law says
Standard Annual Allowance Section 228(1) of the Finance Act 2004 (FA 2004), as amended, sets the standard annual allowance at £60,000 for 2023-24 and each subsequent tax year, unless the Treasury orders otherwise.
How the charge works The annual allowance is not a cap on contributions or tax relief. Instead, where total pension savings exceed the allowance, a tax charge (the "annual allowance charge") is levied to recoup, broadly, the tax relief given on the excess.
For money purchase (defined contribution) arrangements, the pension input amount is the total of member and employer contributions paid during the pension input period ending in the tax year (FA 2004, s.233(1)).
Tapered Annual Allowance (high earners) Under FA 2004, s.228ZA, for 2023-24 onwards, the annual allowance is reduced by £1 for every £2 of adjusted income above £260,000, subject to a minimum floor of £10,000. The taper only applies if threshold income exceeds £200,000 AND adjusted income exceeds £260,000.
Money Purchase Annual Allowance (MPAA) Under FA 2004, ss.227B–227G, individuals who have flexibly accessed a money purchase arrangement face a separate, lower MPAA on their money purchase pension savings. The MPAA is £10,000 for 2023-24 onwards.
HMRC guidance / practice
Standard allowance history
| Tax Year | Annual Allowance |
|---|---|
| 2023-24 onwards | £60,000 |
| 2016-17 to 2022-23 | £40,000 |
| 2011-12 to 2013-14 | £50,000 |
Standard position (2023-24 onwards) For individuals who have not flexibly accessed a money purchase arrangement and to whom the tapered annual allowance does not apply, the annual allowance is £60,000.
Tapered Annual Allowance (2023-24 onwards) The taper applies only if threshold income > £200,000 AND adjusted income > £260,000. The allowance reduces by £1 for every £2 above £260,000 adjusted income, but cannot fall below £10,000.
Money Purchase Annual Allowance (MPAA)
- 2015-16 to 2016-17: £10,000
- 2017-18 to 2022-23: £4,000
- 2023-24 onwards: £10,000
This applies only to money purchase pension savings once flexible access has been triggered.
Carry forward Unused annual allowance from the three preceding tax years can be carried forward to increase the effective limit in the current year, provided the individual was a member of a registered pension scheme in those years.
Minimum tax-relieved contribution Even where the annual allowance is exceeded, tax relief is not restricted at source. Relief is given on the higher of £3,600 or the individual's relevant UK earnings for the year.
Summary table for 2023-24 onwards:
| Individual's situation | Annual Allowance |
|---|---|
| Standard (no taper, no MPAA) | £60,000 |
| High earner (tapered) | £10,000–£60,000 |
| Flexibly accessed money purchase (MPAA triggered) | £10,000 (money purchase) + alternative AA for other savings |
Citation sources
Part 4 Pension schemes etc Chapter 5 Registered pension schemes: tax charges Annual allowance charge Other money purchase arrangements 233 1 The pension input amount in respect of a money purchase arrangement other than a cash balance arrangement is the total of— a any relievable pension contributions paid by or on behalf of the individual under the arrangement, and b contributions paid in respect of the individual under the arrangement by an employer of the individual, during the pension input
From tax year 2023-24 the amount of the individual’s annual allowance depends on the tax year and whether: the money purchase annual allowance applies to the individual the tapered annual allowance applies to the individual For individuals who have not flexibly accessed a money purchase arrangement and to whom the tapered annual allowance does not apply, the annual allowance is £60,000.
Sections 227ZA and 227B to 227G Finance Act 2004 From 6 April 2015 the money purchase annual allowance rules may apply to an individual who has flexibly accessed benefit under a money purchase arrangement. PTM056520 explains which events are classed as flexibly accessing benefits and so trigger the money purchase annual allowance rules to apply to an individual. In any tax year the money purchase annual allowance will apply to an individual if: they have flexibly accessed benefits, and their ‘m
Section 228ZA and paragraph 8(1) Schedule 34 Finance Act 2004 Some high income individuals will have their annual allowance for the tax year reduced. An individual’s annual allowance will be reduced by £1 for every £2 their Adjusted income is above £260,000 (£240,000 for 2020-21 to 2022-23, and £150,000 for 2016-17 to 2019-20). If the reduction to be made from the annual allowance is not a multiple of £1, the reduction is rounded down to the nearest £1. This reduced annual allowance is called th
Raj is a self-employed plumber. He has had a good trading year and wants to use part of his profits to increase his pension fund. He intends to make contributions to his pension arrangement (an other money purchase arrangement), which will be counted against the annual allowance for the 2015-16 tax year. Tax year 2015-16 is split into two ‘mini’ tax years for annual allowance purposes, the pre and post-alignment tax years. In the previous three tax years (2012-13, 2013-14, 2014-15) Raj made cont
For tax year 2015-16 and onwards, individuals who flexibly access a money purchase arrangement in certain circumstances will trigger the money purchase annual allowance rules for the tax year in which they first flexibly access their benefits and every subsequent tax year. Note – tax year 2015-16 is split into two ‘mini’ tax years for annual allowance and money purchase annual allowance purposes, the pre-alignment tax year and the post-alignment tax year (see PTM058010 for more details). Individ
Section 228ZA Finance Act 2004 From 6 April 2016 certain individuals will have their annual allowance reduced. This reduced annual allowance is called the tapered annual allowance. The tapered annual allowance applies to an individual in a tax year, if Their ‘threshold income’ is more than £200,000 (£200,000 for 2020-21 to 2023-24, and £110,000 for 2016-17 to 2019-20) AND their ‘adjusted income’ is more than £260,000 (£240,000 for 2020-21 to 2022-23, and £150,000 for 2016-17 to 2019-20). An indi
For tax year 2023-24 onwards the tapered annual allowance will apply to an individual if: their Threshold Income is more than £200,000, and their Adjusted income is more than £260,000 If the individuals’ 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 annual allowance is the maximum amount of pension savings an individual can make each year with the benefit of tax relief. This includes pension savings that individuals make plus any made by someone else on behalf of the individual - for example, their employer. There is no limit on the amount of pension savings an individual can make each year but there is a limit in respect of the tax relief for those pension savings. The annual allowance is not a restriction on the amount of tax relief g
Part 1 Income tax, corporation tax and capital gains tax Pensions Annual allowance increased 20 1 In Part 4 of FA 2004 (pension schemes etc), section 228 (annual allowance) is amended as follows. 2 For subsection (1) substitute— 1 The annual allowance for the tax year 2023-24 and, subject to subsection (2), each subsequent tax year is £60,000. 3 In subsection (2) for “2014-15” substitute “2023-24” .
Sections 228, 228ZA, 227ZA and 227B Finance Act 2004 The following table shows the changes in the level of the annual allowance since 2011-12. Details of the annual allowance for earlier years are available on the National Archives. Tax Year Annual Allowance 2014-15 onwards £40,000* 2011-12 to 2013-14 £50,000 * For tax year 2015-16 only, a transitional £80,000 annual allowance applies. From tax year 2015-16 a money purchase annual allowance was introduced for individuals who have flexibly access
Part 4 Pension schemes etc Chapter 5 Registered pension schemes: tax charges Annual allowance charge Annual allowance 228 1 The annual allowance for the tax year 2023-24 and, subject to subsection (2), each subsequent tax year is £60,000. 2 The Treasury may by order provide that the annual allowance for any tax year subsequent to the tax year 2023-24 is such amount as is specified in the order.
PART 1 Income tax, corporation tax and capital gains tax Pensions Annual allowance: tapered reduction 22 1 In Part 4 of FA 2004 (pension schemes), section 228ZA (annual allowance charge: tapered reduction of annual allowance) is amended as follows. 2 For subsection (1) substitute— 1 If the individual is a high-income individual for the tax year, the amount of the annual allowance for the tax year in the case of the individual is the amount specified for the tax year by or under section 228 reduc