By Financial Hub Editorial · Published 10 July 2026 · Last reviewed 6 June 2026
The short answer
The annual allowance is the most you can normally pay into pensions each tax year with tax relief. For high earners it can be "tapered" down: once your adjusted income passes a set threshold, the allowance reduces by £1 for every £2 over, down to a floor. Crucially, two income tests both have to be passed before tapering bites, so many people who fear it are not actually affected. Because the figures and thresholds change at Budgets, always confirm the current year’s numbers on GOV.UK before relying on them.
What the annual allowance is
The annual allowance caps how much can go into your pensions each tax year while still getting tax relief. Pay in more than your available allowance and a tax charge can claw back the relief.
How tapering reduces it
For high earners the allowance can shrink. Once your "adjusted income" exceeds the threshold, the allowance falls by £1 for every £2 of income above it, down to a minimum floor. But there is a second gate:
Threshold income test: a lower income measure that must be exceeded first.
Adjusted income test: a broader measure (including pension contributions) that drives the actual reduction.
Only if both are exceeded does the taper apply — so many worried high earners are not actually caught.
Why we are not quoting the exact numbers
The threshold figures and the minimum tapered allowance have changed repeatedly at recent Budgets. Rather than risk an out-of-date number, confirm the current year on GOV.UK or with a tax adviser.
Reduces £1 for every £2 over the adjusted-income threshold
Two tests
Threshold income AND adjusted incomeBoth must be exceeded for taper to apply
Current figures
Check GOV.UKThresholds and the minimum allowance change at fiscal events
Frequently asked questions
Does the taper affect most people?
No. It only affects higher earners who exceed both the threshold-income and adjusted-income tests. Most savers can use the full standard annual allowance.
What counts towards adjusted income?
Broadly your taxable income plus the value of pension contributions (including employer contributions). The exact definition is technical — a tax adviser or GOV.UK is the place to confirm it.
Can I carry forward unused allowance?
Often yes — unused annual allowance from the previous three tax years can sometimes be carried forward, which can soften the impact of tapering. The rules are detailed, so check before relying on them.
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Important — this is general information, not financial advice. This page covers an FCA-adjacent topic (e.g. pensions, trusts or tax planning) and is provided for education only. It does not account for your personal circumstances and is not a personal recommendation. SSAS, trust and tax decisions can have significant and hard-to-reverse consequences — before acting, get advice from an FCA-authorised adviser, a qualified tax adviser, or a STEP-qualified solicitor. Tax treatment depends on your individual circumstances and may change.