HMRC Pension Savings Limits in 2026: Annual Allowance, Tax Relief and Smart Contributions

People search for the "HMRC pension savings threshold" when they want to know how much they can put into a pension before the tax relief stops and a tax charge starts. The answer is the annual allowance, £60,000 for most people in 2026. There are exceptions, though: a lower limit for very high earners and for anyone who has started drawing a pension flexibly, a way to carry forward unused allowance, and a separate limit on how much of your own money gets tax relief. This guide covers all of them for the 2026-27 tax year. It explains relief at source and net pay, and shows with worked £ examples why employer contributions are often the most tax-efficient way for a limited company director to save, and how the self-employed get relief.

Quick answer

For 2026-27 the pension annual allowance is £60,000: the total that can go into your pensions from all sources in the tax year before an annual allowance charge applies. It tapers down to £10,000 for adjusted income over £260,000, falls to £10,000 (the MPAA) once you flexibly access a pension, and you can carry forward unused allowance from the last three years.

• Your own contributions get tax relief only up to 100% of your UK earnings (or £3,600 gross if you have none)

• Employer contributions count towards the allowance but aren't limited by your salary

• Company contributions for directors are usually deductible for Corporation Tax and free of NIC

• Go over the allowance and the excess is taxed at your marginal rate through Self Assessment

The annual allowance: HMRC's pension savings limit

The annual allowance is the most that can be saved into your pensions in a tax year (6 April to 5 April) with tax relief before a charge applies. It has been £60,000 since 6 April 2023, when it rose from £40,000, and it stays at that level for 2026-27.

It covers everything going in, not just what you pay:

• your own contributions, including the basic-rate relief your provider adds;
• contributions from your employer or your own company;
• contributions anyone else pays for you;
• for a defined benefit (final salary or career average) scheme, the increase in the value of your benefits over the year, using HMRC's valuation method.

It applies across all your pensions combined, not per scheme. If you have a workplace pension, a personal pension and a self-invested personal pension (SIPP), add them all up.

Don't confuse the annual allowance with the lump sum allowance of £268,275, which limits how much tax-free cash you can take over your lifetime. The old lifetime allowance on the total size of your pensions was abolished from April 2024.

Pension limits for 2026-27

£60,000

Annual allowance

All contributions combined

£10,000

Money purchase annual allowance

After flexible access

£10,000

Minimum tapered allowance

Adjusted income over £360,000

£268,275

Lump sum allowance

Lifetime tax-free cash

Two different limits: the annual allowance and tax relief on your own contributions

There are two separate caps, and people often mix them up.

1. The tax relief limit on your own contributions. You personally get tax relief on contributions up to 100% of your relevant UK earnings for the year: salary, bonuses and self-employed profits, but not dividends, rental income or savings interest. If you have no earnings, or earnings below £3,600, you can still pay in up to £2,880 net a year and the provider adds basic-rate relief to make £3,600.

2. The annual allowance on all contributions. Everything going into your pensions, from you and anyone else, is tested against £60,000 (or your tapered or money purchase allowance).

This is why the route matters for company directors. A director paid a salary of £12,570 who takes the rest of their income as dividends can only get personal tax relief on up to £12,570 of their own contributions, because dividends aren't earnings. But their company can pay in up to the full annual allowance, and more with carry forward, because employer contributions aren't capped by the director's salary.

Relief at source vs net pay: how you get the tax back

How you receive tax relief on your own contributions depends on how your scheme is set up.

Relief at source vs net pay

	Relief at source	Net pay arrangement
Used by	Personal pensions, SIPPs, stakeholder and some workplace schemes	Many occupational (workplace) schemes
How it works	You pay from taxed income; the provider claims 20% from HMRC and adds it to your pot	Your employer deducts contributions from pay before Income Tax is calculated
Higher and additional rate relief	Claim the extra 20% or 25% through Self Assessment or by contacting HMRC	Given automatically through PAYE
Non-taxpayers	Still get 20% added	No relief through payroll; HMRC top-up payments from 2024-25
Effect on National Insurance	None	None (unless you use salary sacrifice)

Used by

Relief at source

Personal pensions, SIPPs, stakeholder and some workplace schemes

Net pay arrangement

Many occupational (workplace) schemes

How it works

Relief at source

You pay from taxed income; the provider claims 20% from HMRC and adds it to your pot

Net pay arrangement

Your employer deducts contributions from pay before Income Tax is calculated

Higher and additional rate relief

Relief at source

Claim the extra 20% or 25% through Self Assessment or by contacting HMRC

Net pay arrangement

Given automatically through PAYE

Non-taxpayers

Relief at source

Still get 20% added

Net pay arrangement

No relief through payroll; HMRC top-up payments from 2024-25

Effect on National Insurance

Relief at source

None

Net pay arrangement

None (unless you use salary sacrifice)

With relief at source, if you pay £8,000, your provider claims £2,000 from HMRC and £10,000 goes into your pension. A higher-rate taxpayer can claim another 20% of the gross contribution (£2,000 here) through Self Assessment. An additional-rate taxpayer can claim another 25% on contributions up to the income taxed at 45%. HMRC gives this extra relief by extending your basic-rate band by the gross contribution, so more of your income is taxed at 20% instead of 40%. Scottish taxpayers claim between 1% and 28% extra depending on their band. Starter-rate taxpayers in Scotland keep the full 20% even though they pay 19%.

With a net pay arrangement, your employer takes the contribution out of your pay before tax, so you get relief at your top rate straight away and there's nothing to claim. The catch used to be that people earning below the personal allowance got no relief at all. For contributions from 2024-25 onwards, HMRC pays low earners in net pay schemes a top-up to match what they would have got under relief at source.

Salary sacrifice is different again: you give up salary in exchange for an employer contribution, which saves National Insurance for both you and the employer. From April 2029, only the first £2,000 a year of salary-sacrificed contributions will be free of National Insurance. Ordinary employer contributions will stay completely free of NIC, and the Income Tax treatment doesn't change.

The tapered annual allowance for high earners

If you have very high income, your annual allowance is reduced. Two tests apply, and you're only affected if you fail both:

1. Threshold income over £200,000. Broadly, this is your taxable income less your own relief-at-source contributions, with any salary sacrificed for pension since July 2015 added back.
2. Adjusted income over £260,000. Broadly, this is your taxable income plus all pension contributions made by you and your employer.

For every £2 of adjusted income above £260,000, your allowance drops by £1, down to a minimum of £10,000. That minimum is reached at adjusted income of £360,000.

Example. A company director has a salary and dividends totalling £230,000 (threshold income £230,000, so the first test is failed). The company pays £50,000 into their pension, giving adjusted income of £280,000. That's £20,000 over the limit, so the allowance falls by £10,000 to £50,000. The £50,000 contribution is exactly at the reduced allowance, so there's no charge. A £60,000 contribution would push adjusted income to £290,000, reduce the allowance to £45,000 and create a £15,000 excess, unless carry forward covers it.

Because employer contributions count towards adjusted income, directors close to the taper should model the figures before the company year end, not after.

The money purchase annual allowance (MPAA)

Once you flexibly access a defined contribution pension, your annual allowance for future money purchase contributions falls to £10,000. Flexible access includes:

• taking taxable income from flexi-access drawdown;
• taking an uncrystallised funds pension lump sum (UFPLS);
• buying certain flexible annuities.

Taking only your tax-free lump sum and leaving the rest invested doesn't trigger it, and nor does buying a lifetime annuity that can't go down. Once triggered, the MPAA applies for the rest of your life and you can't use carry forward against it. It matters to business owners in their late 50s and 60s who draw some pension income while still working and want to keep saving through the business. If you've triggered it, the company can't pay in more than £10,000 a year to defined contribution schemes without a charge.

Carry forward: paying in more than £60,000

If you didn't use your full allowance in any of the previous three tax years, you can carry the unused amount forward and add it to this year's. The rules:

• You must have been a member of a registered UK pension scheme at some point in each earlier year you carry forward from. You don't need to have paid anything in, but you need to have had a pension.
• You use this year's allowance first, then unused allowance from the earliest year.
• Your own contributions still only get relief up to 100% of this year's earnings. Carry forward mainly helps with large employer contributions and big one-off personal contributions by high earners.
• It isn't available against the MPAA, and if you were tapered in an earlier year, your unused allowance is based on the tapered figure.

Carry forward example for 2026-27

2023-24

Allowance £60,000, paid in £10,000: £50,000 unused

2024-25

Allowance £60,000, paid in £20,000: £40,000 unused

2025-26

Allowance £60,000, paid in £0 (still a scheme member): £60,000 unused

2026-27

Up to £60,000 + £150,000 = £210,000 can go in without a charge

In this example, a director could have the company pay up to £210,000 in 2026-27 without an annual allowance charge, provided the contribution passes the "wholly and exclusively" test described below and the director's adjusted income doesn't trigger the taper. If 2023-24's unused £50,000 isn't used this year, it's lost from 6 April 2027.

Employer contributions: the tax-efficient route for limited company directors

If you run your business as a limited company, having the company pay into your pension is usually the most tax-efficient way to save. Three things make it work:

1. Corporation Tax relief. An employer contribution is normally an allowable business expense, so it reduces the company's taxable profit. HMRC's manuals say relief is due unless there's a non-trade purpose. HMRC looks at the director's whole remuneration package and accepts it where it's in line with what an unconnected employee doing similar work would get. For most owner-directors working in the business, that test is easily met.
2. No National Insurance. Employer pension contributions aren't earnings for NIC, so neither the company nor the director pays NIC on them. That remains true after the 2029 salary sacrifice change.
3. No Income Tax now. The director pays no tax on the contribution when it's made. Tax is paid when the pension is drawn, with up to 25% usually tax-free, subject to the lump sum allowance.

The contribution must actually be paid to the scheme within the company's accounting period to be deducted in that period. An amount accrued in the accounts but paid after the year end is deducted in the following period.

Worked example: £20,000 through the pension vs as a dividend

Brightside Ltd makes £100,000 of profit after paying its director a salary of £12,570. The director already receives enough dividends to use the basic-rate band, so any extra dividend is taxed at the 2026-27 higher dividend rate of 35.75%. The director wants to put away £20,000 of company profit for retirement.

Route A puts £20,000 in the pension at a net cost to the company of £14,700. Route B puts £11,805.94 in the pension and returns about £2,951 to the director through Self Assessment, because extending the basic-rate band moves that slice of dividends from 35.75% to 10.75%. That's roughly £14,757 of value in total. The employer route is worth about £5,240 more for the same £20,000 of profit, before considering tax when the pension is eventually drawn, which applies to both pots. Route B also hits a ceiling quickly: the director's earnings are only £12,570, so personal contributions above £12,570 gross a year get no tax relief at all, while the company could pay in up to the full annual allowance.

At this level of profit, the company's marginal Corporation Tax rate is 26.5%, so every £1 of employer contribution costs the company about 73.5p. Our Corporation Tax guide explains marginal relief, and the dividend tax guide has the full 2026-27 dividend rates.

Pension tax relief if you're self-employed

Sole traders and partners have no employer, so the company route isn't available. You pay into a personal pension or SIPP yourself, through relief at source, and your relief is limited to 100% of your taxable trading profits (your relevant UK earnings) for the year.

Example. Priya is a sole trader in England with 2026-27 profits of £60,000. She pays £8,000 into a SIPP. Her provider adds £2,000 of basic-rate relief, so £10,000 goes in. When she files her Self Assessment return, her basic-rate band is extended by the £10,000 gross contribution, from £50,270 to £60,270. All her profit is now taxed at basic rate, so the £9,730 that would have been taxed at 40% is taxed at 20%, saving her £1,946. The £10,000 pension contribution has cost her £8,000 − £1,946 = £6,054. Class 4 National Insurance is unaffected, because pension contributions don't reduce profits for NIC.

Self-employed people should also remember payments on account: lower taxable income this year can reduce next year's payments too. Our payments on account guide explains how to reduce them if your tax bill falls.

How a self-employed person claims higher-rate relief

1. 1

   Pay into a relief-at-source pension

   Pay the net amount; the provider claims 20% from HMRC and adds it to your pot, usually within a few weeks.

2. 2

   Keep the contribution statement

   Note the gross amount (your payment plus the 20%) for each tax year.

3. 3

   Enter it on your tax return

   Put the gross figure in the pension contributions box of your Self Assessment return.

   Self Assessment guide
4. 4

   HMRC extends your basic-rate band

   Higher and additional rate relief comes through as a lower tax bill, not as money into the pension.

The annual allowance charge and Scheme Pays

If total contributions go over your available allowance (including carry forward), the excess is added to your income and taxed at your marginal rate, at 20%, 40% or 45% (or Scottish rates), through Self Assessment. You must register for Self Assessment if you aren't already and report the charge in the pension savings tax charges section.

Your scheme must send you a pension savings statement by 6 October after the end of the tax year if your savings in that scheme exceeded the annual allowance. For 2025-26 the deadline was 6 October 2026. Statements don't take account of other schemes or carry forward, so you still need to do the overall calculation yourself.

You can ask your scheme to pay the charge from your pension pot (Scheme Pays) if the charge is more than £2,000 and your savings in that scheme alone were over the annual allowance. You must give the scheme notice by 31 July in the calendar year after the tax year ends: for a 2025-26 charge, which ended on 5 April 2026, that's 31 July 2027. You still report the charge on your tax return. Your pension benefits are then reduced to pay for it.

Recent and upcoming changes

The limits have been stable since 2023, but two changes ahead affect how business owners should plan: Inheritance Tax on unused pensions from April 2027 and the salary sacrifice cap from April 2029.

Pension tax changes to know

6 April 2023

Annual allowance up from £40,000 to £60,000; MPAA up from £4,000 to £10,000; taper's adjusted income limit raised to £260,000

6 April 2024

Lifetime allowance abolished; lump sum allowance of £268,275 introduced

6 April 2027

Most unused pension funds and death benefits count towards the estate for Inheritance Tax; personal representatives report and pay; death-in-service benefits excluded

April 2029

Salary-sacrificed contributions above £2,000 a year attract National Insurance; other employer contributions stay NIC-free

The Inheritance Tax change makes it less attractive to treat a pension purely as a way to pass wealth on. It doesn't change the tax relief on the way in, so employer contributions remain efficient for retirement saving itself.

Common mistakes

• Directors paying in personally from dividends. Relief is capped at your salary, and you lose the Corporation Tax saving. Use employer contributions instead.
• Paying after the company year end. The deduction falls into the next period if the money isn't with the scheme by the accounting date.
• Forgetting employer contributions in the taper test. They count towards adjusted income.
• Triggering the MPAA by accident. Taking a small taxable drawdown payment while still contributing caps future savings at £10,000.
• Not claiming higher-rate relief. Relief-at-source members who don't file a Self Assessment return can contact HMRC to claim; many never do.
• Losing carry forward. Unused allowance from three years ago expires at the end of this tax year.

Official links

• Annual allowance (GOV.UK)Limits, carry forward and the charge
• Pension tax relief (GOV.UK)Relief at source, net pay and claiming extra relief
• Pension schemes rates and allowancesCurrent figures
• Work out your tapered annual allowanceThreshold and adjusted income
• Check your annual allowance (HMRC calculator)Includes carry forward
• HS345 Pension savings tax chargesHow to report a charge on your return

What to do next

Add up everything paid into your pensions so far this tax year, including employer contributions, and compare it with your allowance. If you run a limited company, plan any employer contribution before the company's year end and keep it in proportion to your role. If you might use carry forward, gather your pension statements for the last three years first, and consider advice for large contributions. Use the compound interest calculator to see how regular contributions grow, and the budget planner to fit them into your cash flow. For the bigger picture on how you pay yourself, read our sole trader vs limited company comparison.

This is general information, not legal or tax advice — confirm on the official source or with a professional.

Frequently asked questions

What is the HMRC pension savings threshold for 2026?

The annual allowance is £60,000 for 2026-27. It's the most that can be paid into all your pensions in a tax year, by you, your employer or anyone else, before an annual allowance charge applies. It can be lower if your income is very high (the taper) or if you've flexibly accessed a pension (the £10,000 money purchase annual allowance).

Can I pay more than £60,000 into my pension?

Yes, if you have unused allowance from the previous three tax years and you were a member of a registered pension scheme in those years. Carry forward lets you add that unused allowance to this year's. Your own contributions still only get tax relief up to 100% of your UK earnings for the year; employer contributions aren't limited by your earnings.

How much tax relief do I get on pension contributions?

Relief at your highest rate of Income Tax. In a relief-at-source scheme your provider adds 20%, and higher or additional rate taxpayers claim the rest through Self Assessment. In a net pay scheme your employer takes contributions before tax, so you get full relief automatically. Non-earners can pay up to £2,880 a year and receive 20% relief.

Are employer pension contributions tax-free for a limited company director?

Generally yes. The company can usually deduct the contribution from its profits for Corporation Tax if it's paid in the period and is reasonable for the work the director does. No National Insurance is due, and the director pays no Income Tax on it now. It counts towards the director's annual allowance.

What happens if I go over the annual allowance?

You pay an annual allowance charge on the excess at your marginal Income Tax rate, reported through Self Assessment. If the charge is over £2,000 and your savings in one scheme exceeded the allowance, you can ask that scheme to pay it from your pension ('Scheme Pays') by 31 July in the calendar year after the tax year ends (for 2025-26, by 31 July 2027).

What is the money purchase annual allowance?

A lower limit of £10,000 a year on contributions to defined contribution pensions. It's triggered when you flexibly access a pension, for example by taking taxable income from drawdown or an uncrystallised funds lump sum. Taking only your tax-free cash doesn't trigger it. Once triggered, it applies for life.

Sources & verification

Figures on this page were checked against the sources below when it was last reviewed on 8 October 2026. Each rate and limit is stored once with its own official source and review date, and official update channels are monitored daily so changes are picked up. How we verify

1. 1.Pension schemes rates and allowances — HMRC / GOV.UK · accessed 8 October 2026
2. 2.Tax on your private pension contributions: annual allowance — GOV.UK · accessed 8 October 2026
3. 3.Tax on your private pension contributions: tax relief — GOV.UK · accessed 8 October 2026
4. 4.Pension schemes: work out your tapered annual allowance — HMRC / GOV.UK · accessed 8 October 2026
5. 5.Pensions Tax Manual PTM055100: carry forward — HMRC · accessed 8 October 2026
6. 6.Pensions Tax Manual PTM043200: employer contributions — conditions — HMRC · accessed 8 October 2026
7. 7.Business Income Manual BIM46035: pension contributions — HMRC · accessed 8 October 2026
8. 8.Pensions Tax Manual PTM056430: Scheme Pays deadlines — HMRC · accessed 8 October 2026
9. 9.HS345 Pension savings — tax charges (2026) — HMRC / GOV.UK · accessed 8 October 2026
10. 10.Changes to salary sacrifice for pensions from April 2029 — HM Treasury / HMRC · accessed 8 October 2026
11. 11.Inheritance Tax on unused pension funds and death benefits — HM Treasury / HMRC · accessed 8 October 2026
12. 12.Pensions relief relating to net pay arrangements — HMRC / GOV.UK · accessed 8 October 2026