Written by Oroni Chowdhury · Published: November 2026 · Last reviewed: November 2026 · Applies to the 2026/27 tax year
High earners rarely notice the pension taper in advance. It usually surfaces months later, when a pension statement arrives or an accountant asks for employer contribution figures. By then the savings are made, and the only questions are how large the charge is and who will pay it.
This guide explains the pension taper 2026/27 position step by step: how to calculate it from your own figures, how the charge is taxed, which SA101 boxes to complete, when your scheme can pay, and the checks worth making before 5 April.
- You are only tapered if threshold income is over £200,000 and adjusted income is over £260,000.
- The lowest possible tapered allowance is £10,000, reached at adjusted income of £360,000.
- Employer contributions raise adjusted income but not threshold income.
- Unused allowance from the three previous tax years can reduce or remove a charge.
- Excess savings go in box 10 of SA101, even when the scheme pays the tax.
- Mandatory scheme pays is tested against the standard £60,000 allowance, not your tapered figure.
What Is the Pension Taper?
The annual allowance is the standard limit on pension savings in a tax year before an annual allowance tax charge can arise. It covers your own contributions, your employer’s and, for final salary schemes, the growth in your benefits. For 2026/27 it is £60,000. It is not the same as the limit on tax relief for your own contributions, which is broadly capped at 100% of your UK earnings, or £3,600 gross if you earn less.
The pension taper reduces that £60,000 for very high earners. HMRC calls it the tapered annual allowance and explains the method on its page about how to work out your tapered annual allowance.
Two tests, both must be failed
- Threshold income above £200,000. At or below this, no taper applies, whatever your adjusted income.
- Adjusted income above £260,000. This broader figure includes employer contributions.
How the allowance falls
| Adjusted income | Reduction | Tapered allowance |
|---|---|---|
| Up to £260,000 | None | £60,000 |
| £280,000 | £10,000 | £50,000 |
| £300,000 | £20,000 | £40,000 |
| £330,000 | £35,000 | £25,000 |
| £360,000 or more | £50,000 (cap) | £10,000 |
These rows assume threshold income is already above £200,000.
Pension Taper Calculation: Threshold Income and Adjusted Income
Errors usually come from starting with gross salary. HMRC uses two specific measures, and both start from net income.
Step 1: net income
Total your taxable income for the year: employment pay, benefits in kind, trading profit, rent, interest and dividends. Then deduct the reliefs that reduce it, such as pension contributions paid under a net pay arrangement or claimed on your tax return.
Be careful with your P60. If your employer runs a net pay arrangement, the taxable pay on your P60 has usually already had your pension contribution taken off. Use that figure as it is and don’t deduct the contribution a second time.
Step 2: threshold income
| Item | Treatment |
|---|---|
| Net income from Step 1 | Starting point |
| Personal contributions paid under relief at source (gross) | Deduct |
| Lump sum death benefits from a registered scheme | Deduct |
| Pay given up under salary sacrifice or flexible remuneration made after 8 July 2015 | Add back |
| Employer contributions | Ignore |
| Other taxable income (rent, interest, dividends, profits) | Already in net income |
Step 3: adjusted income
| Item | Treatment |
|---|---|
| Net income from Step 1 | Starting point |
| Contributions deducted under a net pay arrangement | Add back |
| Contributions where you claimed relief on your return (relief on making a claim) | Add back |
| UK relief given on contributions to an overseas scheme | Add back |
| Employer contributions, including salary sacrifice amounts | Add |
| Lump sum death benefits | Deduct |
Relief at source contributions are not added back, because they were never deducted from net income. Employer contributions only matter once threshold income is also above £200,000: a large employer payment alone cannot taper someone whose threshold income is lower.
Worked Example: Daniel’s Pension Taper Charge
- Salary £250,000 plus a £40,000 bonus: net income £290,000
- Personal pension contributions of £20,000 gross, under relief at source
- Employer contributions of £30,000
- No salary sacrifice and no other income
Threshold income: £290,000 less £20,000 = £270,000, above £200,000.
Adjusted income: £290,000 plus £30,000 = £320,000. That is £60,000 over £260,000, so the allowance drops by £30,000 to £30,000.
Savings and carry forward: total savings are £50,000. With £5,000 of unused allowance brought forward, his available allowance is £35,000 and the excess is £15,000.
Charge: Daniel’s income is well into the additional-rate band, so the whole excess is taxed at 45%: £6,750.
Daniel never asked for a bigger pension, yet the pension taper turned an ordinary employment package into a four-figure bill. His employer’s contribution counted twice over: it raised his adjusted income and it used up his smaller allowance.
What if the employer had paid £10,000 less?
| Calculation | As paid | £10,000 lower employer contribution |
|---|---|---|
| Adjusted income | £320,000 | £310,000 |
| Tapered allowance | £30,000 | £35,000 |
| Pension savings | £50,000 | £40,000 |
| Carry forward | £5,000 | £5,000 |
| Available allowance | £35,000 | £40,000 |
| Excess | £15,000 | £0 |
| Charge at 45% | £6,750 | £0 |
Lower savings and a higher allowance work together, so a modest change removes the charge entirely here. That is an illustration, not a recommendation: cutting employer contributions also cuts your pension.
The Annual Allowance Charge and Carry Forward
Once the pension taper has set your allowance, any excess is added to your taxable income and taxed at the rate or rates that apply to that slice. Someone well into the additional-rate band pays 45% on all of it, but if the excess straddles a band boundary, part is taxed at 40% and part at 45%. Scottish taxpayers use Scottish bands, up to 48%.
How carry forward works
- Your current-year allowance is used first, then unused allowance from the three previous tax years, oldest first.
- Each earlier year’s unused amount uses the allowance that applied to you then, which may itself have been tapered.
- You must have been a member of a registered pension scheme in each year you carry forward from.
| Tax year | Allowance that applied | Pension input | Unused |
|---|---|---|---|
| 2023/24 | £40,000 (tapered) | £35,000 | £5,000 |
| 2024/25 | £30,000 (tapered) | £30,000 | £0 |
| 2025/26 | £30,000 (tapered) | £30,000 | £0 |
| Total available to carry forward | £5,000 |
This illustrative table shows where Daniel’s £5,000 came from. Keep a similar record each year. A full calculation worksheet is in this tapered annual allowance guide.
Final salary (defined benefit) schemes
With a defined benefit scheme, what counts is not what you paid in but the growth in your pension rights, called the pension input amount. Broadly, the scheme multiplies the increase in your annual pension by 16, after first uprating the opening value by CPI, and adds any increase in a separate lump sum.
Pension savings statements
Your scheme must send a statement by 6 October after the tax year if your savings in that scheme exceed the standard £60,000, regardless of your tapered figure. A tapered saver with, say, £40,000 in one scheme may not receive one automatically and may need to ask.
Reporting the Pension Taper on Your Tax Return
If the pension taper leaves you with an excess, it has to go through Self Assessment, even when your scheme settles the tax. If you don’t usually file, register so that HMRC can assess the charge.
HMRC’s HS345 helpsheet for 2026 explains the entries, found under “Pension savings tax charges” on the SA101 Additional information pages:
- Box 10: the savings above your available allowance after carry forward. Enter the excess, not the tax.
- Box 11: the tax your scheme has paid or will pay for you. Leave it blank if you pay it all yourself.
- Box 12: the Pension Scheme Tax Reference (PSTR) of the scheme paying.
- Several schemes paying: list the details in the “Any other information” box on page TR7.
For Daniel, box 10 shows £15,000. HMRC’s calculation then adds £6,750 to his liability and gives credit for any amount in box 11.
Directors and company contributions
Directors of their own company often meet the taper because the company pays large employer contributions in place of salary. Those payments sit outside threshold income but inside adjusted income, so the taper bites once threshold income also passes £200,000. Our Self Assessment for directors guide covers the rest of the return.
Pension Scheme Pays: Mandatory or Voluntary
Scheme pays lets your scheme settle some or all of the charge in exchange for a permanent cut in your benefits. GOV.UK sets out who must pay the annual allowance tax charge.
| Mandatory | Voluntary | |
|---|---|---|
| When available | Charge over £2,000 and savings in that scheme above the standard £60,000 | At the scheme’s discretion |
| Most the scheme must pay | Tax on the part of that scheme’s savings above £60,000 | Whatever the scheme agrees |
| Deadline to ask | 31 July two years after the tax year ends (31 July 2028 for 2026/27) | Set by the scheme |
| Cost to you | Lower benefits | Lower benefits |
HMRC’s PTM056410 confirms that the mandatory test ignores the taper, and that the maximum is worked out by matching that scheme’s excess over the standard allowance against the tax bands of your charge. Daniel’s £50,000 in one scheme is below £60,000, so mandatory scheme pays isn’t open to him. He would need his scheme’s agreement to voluntary scheme pays, or pay HMRC directly.
How the Charge Affects Your Tax Bill
A pension taper charge is collected with the rest of your Self Assessment liability, so it changes your cash flow as well as your tax.
- Balancing payment: anything you pay yourself is due with your Self Assessment bill on 31 January after the tax year.
- Payments on account: a larger bill can raise the next year’s payments on account. If the charge was a one-off, you can apply to reduce them to a realistic estimate.
- Interest: late payment interest runs from the due date, as our guide to HMRC interest on late payments explains.
How to Avoid a Pension Taper Charge Before 5 April
Planning works far better before the tax year ends than after. None of these steps guarantees a saving, and each should be weighed against your wider pension and tax position.
- Estimate your income early: project salary, bonus, profits, rent and dividends for the full year.
- Check both tests: work out threshold income and adjusted income, not just one.
- Look at bonus and employer contributions: ask payroll what will be paid and when.
- Confirm relief limits: check that personal contributions stay within your relevant UK earnings.
- Review carry forward: gather the last three years’ allowances and pension inputs.
- Talk to your employer or scheme: discuss the timing and level of contributions before they are made.
- Defined benefit members: ask the scheme for an estimate of your pension input amount.
Missed the Charge? How to Put It Right
- Within 12 months of the filing deadline: amend the return online and complete box 10.
- After that: write to HMRC with corrected figures for each year affected.
- Penalties: HMRC looks at why the error happened and how it was disclosed. Telling HMRC before it asks can help reduce a penalty, but there is no automatic reduction.
- Interest: charged on any tax paid late.
Mistakes to Avoid
These are the errors that most often lead to a wrong pension taper calculation or a query from HMRC.
| Mistake | Result | Better approach |
|---|---|---|
| Using gross salary | Taper missed or overstated | Calculate both income measures |
| Deducting net pay contributions twice | Income understated | Check what your P60 already excludes |
| Forgetting employer contributions | Adjusted income too low | Get figures from payroll or the scheme |
| Leaving box 10 blank | HMRC query | Always report the excess |
| Relying on mandatory scheme pays | Missed deadline or refusal | Check savings in that scheme against £60,000 |
Pension Taper FAQs
What are the pension taper 2026/27 limits?
Threshold income of £200,000 and adjusted income of £260,000, with a £10,000 minimum allowance reached at adjusted income of £360,000.
Does salary sacrifice help with threshold income?
Not for arrangements made after 8 July 2015. The pay you gave up is added back, so it can’t be used to stay under £200,000.
Is a bonus counted in the year it’s paid?
Generally yes. Employment income is taxed when received, so the payment date decides which tax year it falls into.
Can carry forward cover a large charge?
It can reduce or remove one, but only using unused allowance from the previous three years, measured against the allowance that applied in each year.
How does the money purchase annual allowance interact with the taper?
Once you flexibly access a pension, money purchase savings above £10,000 are charged, and carry forward can’t be used against that limit. Other savings, such as defined benefit growth, are broadly tested against an alternative allowance: your annual allowance, tapered if relevant, less £10,000.
Do I still get tax relief on contributions above my tapered allowance?
Usually yes, within the earnings limit. The annual allowance charge then claws back the relief on the excess.
What if I am tapered but my scheme won’t pay?
You pay the charge through Self Assessment by 31 January, alongside the rest of your bill.
Does the taper affect a defined benefit pension?
Yes. The pension input amount, based on growth in your benefits, counts towards your savings for the year.
Do I need an accountant for this?
It isn’t compulsory, but the income tests, carry forward and scheme pays interact, so a review before filing often avoids errors.
Final Verdict: Getting the Pension Taper Right in 2026/27
The pension taper only applies when both income tests are failed, but then it produces a real charge that must be reported. Calculate threshold and adjusted income carefully, use carry forward, and put any excess in box 10. Check early whether mandatory scheme pays is available, and plan bonus and contribution timing before 5 April.
- Collect income, bonus and pension figures for the year.
- Work out both income measures, your tapered allowance and carry forward.
- Report any excess on SA101 and agree scheme pays before the deadline.