What is Annual Allowance? UK Definition 2026/27
Quick Answer
The maximum amount you can save into pensions each year with tax relief.
Definition of Annual Allowance
The Annual Allowance is the maximum amount of pension savings you can make in a tax year with tax relief. For 2026/27, the standard allowance is £60,000 (or 100% of earnings if lower). Unused allowance can be carried forward for up to 3 years. Exceeding the limit triggers the Annual Allowance Charge.
Annual Allowance — Key Facts for 2026/27
| Standard limit | £60,000 |
| Carry forward | 3 years |
| Money Purchase AA | £10,000 (if accessed) |
| Tapered AA | Down to £10,000 for high earners |
How Annual Allowance Works — Example
- 12026/27 allowance: £60,000
- 2Employer contribution: £25,000
- 3Personal contribution: £15,000
- 4Total: £40,000
- 5Unused: £20,000 (carry forward available)
How Annual Allowance Affects Your Tax
The Annual Allowance limits tax-advantaged pension saving. High earners face a tapered allowance, and those who have accessed flexible benefits have a reduced Money Purchase Annual Allowance. Planning is essential to avoid the charge.
Official HMRC Guidance on Annual Allowance
For official guidance, refer to HMRC's documentation. Tax rules can change, so always verify current rates and thresholds on gov.uk.
HMRC: Pension Annual AllowanceFrequently Asked Questions about Annual Allowance
Related Tax Terms
Accuracy Note
This information is for guidance only and is based on 2026/27 tax year rates. Tax rules are complex and your circumstances may differ. For personal advice, consult a qualified accountant or tax adviser.