Published: July 2026 | Fact-Checked & Audited By: David Vance, CTA FCA (Chartered Tax Advisor & Accountant)
This guide is fully updated for the 2026/27 UK tax year. All pension calculations and tax relief limits have been audited against official HMRC guidelines.
High-earning individuals in the UK face a complex tax hurdle known as the Tapered Annual Allowance. While the standard annual pension allowance is £60,000, high earners see this limit progressively reduced (tapered) based on their income. If you do not calculate your taper correctly, you can face substantial tax charges on your pension contributions. In this guide, we outline the Threshold Income and Adjusted Income rules and show you how the taper affects your pension carry forward calculations.
Understanding the Two Income Metrics
To determine if you are subject to the pension taper, HMRC looks at two distinct income figures for the tax year:
- Threshold Income: Your net income after deducting personal pension contributions, but including any salary sacrifice arrangements set up after July 2015. For 2026/27, the Threshold Income limit is £200,000. If your Threshold Income is £200,000 or less, the taper does not apply.
- Adjusted Income: Your net income plus any pension contributions made by your employer (or via salary sacrifice). For 2026/27, the Adjusted Income limit is £260,000.
How the Taper Calculation Works
If both your Threshold Income exceeds £200,000 and your Adjusted Income exceeds £260,000, your annual allowance is reduced. For every £2 of Adjusted Income over £260,000, your allowance is reduced by £1, down to a minimum allowance of £10,000:
$$Tapered Allowance = 60,000 – frac{Adjusted Income – 260,000}{2}$$
The minimum tapered allowance of £10,000 is reached when your Adjusted Income reaches £360,000 or more.
Tapered Allowance Thresholds Table (2026/27)
| Adjusted Income Level | Annual Pension Allowance |
|---|---|
| Up to £260,000 | £60,000 |
| £280,000 | £50,000 |
| £300,000 | £40,000 |
| £320,000 | £30,000 |
| £340,000 | £20,000 |
| £360,000 or more | £10,000 (Minimum) |
David Vance, CTA FCA, recommends: “For high earners, the taper reduces the historic annual allowance values that you can carry forward. If your income was £360k in 2024/25, your annual allowance for that year was only £10,000. When calculating carry forward, you must calculate the taper individually for each of the three preceding tax years based on your income in those specific years.”
Topical Cluster Links
To calculate carry forward or model your pension tax relief, refer to our other guides:
- Use our Pension Carry Forward Calculator to audit your historic allowances.
- Read our guide on Pension Carry Forward Rules: Unused Annual Allowances.
- Read our guide on Pension Carry Forward Case Studies: Maximising Tax Relief.
Frequently Asked Questions (FAQs)
1. What is the difference between Threshold and Adjusted Income?
Threshold Income is net income excluding pension contributions. Adjusted Income is net income plus all employer and employee pension contributions.
2. What is the minimum tapered annual allowance?
The minimum annual allowance under the taper rules is £10,000, which applies to individuals with an Adjusted Income of £360,000 or more.
3. Does the taper affect my carry forward allowance?
Yes. If your income in any of the previous three years triggered the taper, the allowance you can carry forward from that year is your tapered allowance, not the standard £60,000.