What is the tapered annual allowance for high earners?
Answered 17 March 2026
Tapered Annual Allowance for High Earners
What the law says
The tapered annual allowance is governed by s.228ZA Finance Act 2004, as most recently amended for 2023-24 onwards. The statutory formula is:
"If the individual is a high-income individual for the tax year, the amount of the annual allowance for the tax year … is the amount specified for the tax year by or under section 228 reduced (but not below £10,000) by— (AI − £260,000) × ½ where AI is the individual's adjusted income for the tax year."
In plain terms, the annual allowance is reduced by £1 for every £2 of adjusted income above £260,000, subject to a minimum floor of £10,000.
If the reduction is not a whole pound, it is rounded down to the nearest £1.
HMRC guidance / practice
Who it applies to (2023-24 onwards): The tapered annual allowance applies only if both conditions are met:
- Threshold income > £200,000, AND
- Adjusted income > £260,000
If threshold income is £200,000 or below, there is no need to calculate adjusted income — the taper cannot apply.
The reduction and minimum floor (current rules):
- Reduced by £1 for every £2 of adjusted income above £260,000
- Cannot be reduced below £10,000 (for 2023-24 onwards)
- This means the taper is fully exhausted (i.e. the minimum £10,000 is reached) once adjusted income reaches £360,000 (since (£360,000 − £260,000) × ½ = £50,000 reduction from the standard £60,000 allowance... noting the standard allowance is £60,000 from 2023-24)
Historical thresholds for reference:
| Period | Threshold income | Adjusted income | Minimum floor |
|---|---|---|---|
| 2023-24 onwards | >£200,000 | >£260,000 | £10,000 |
| 2020-21 to 2022-23 | >£200,000 | >£240,000 | £4,000 |
| 2016-17 to 2019-20 | >£110,000 | >£150,000 | £10,000 |
HMRC's detailed guidance on calculating threshold income and adjusted income is at PTM057100, with worked examples at PTM057200.
Citation sources
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
Part 1 Income tax, corporation tax and capital gains tax Pensions Annual allowance: tapering 22 1 In Part 4 of FA 2004 (pension schemes etc), section 228ZA (tapered reduction of annual allowance) is amended as follows. 2 In subsection (1)— a for “£4,000” substitute “£10,000” ; b for “£240,000” substitute “£260,000” . 3 In subsection (3)(a) and (b), for “£240,000” substitute “£260,000” . 4 The amendments made by this section have effect for the tax year 2023-24 and subsequent tax years.
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.
Part 4 Pension schemes etc Chapter 5 Registered pension schemes: tax charges Annual allowance charge Tapered reduction of annual allowance: high-income individual 228ZA 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 reduced (but not below £10,000 ) by— ( AI − £ 260,000 ) × 1 2 where AI is the individual's adjusted income for the tax