What is the pension annual allowance in the 25/26 tax year and how does it work in the UK?
The pension annual allowance is a limit to the total amount of contributions that you can pay into a pension scheme in one tax year while benefitting from tax relief.
The current annual allowance for the 2025/26 tax year is £60,000 per year. The annual allowance includes your personal contributions, employer contributions and tax relief. It doesn’t include the State Pension.
If your taxable earnings are under £60,000 then you can only contribute up to 100% of your earnings in that tax year.
What happens if I go over the pension annual allowance?
If you contribute more than the annual allowance to your pension then you will be subject to a tax charge, called the annual allowance charge.
If you go over your annual pension allowance then you should include the excess amount on your self-assessment tax return. You will not receive tax relief on the amount over your allowance.
What happens if I don’t use my full allowance?
You may be able to carry forward any unused pension allowances from the previous three tax years. This is known as the carry-forward allowance. This may mean that if you go over the limit in one tax year you will not be subject to the annual allowance charge.
The carry-forward allowance is complex, at Borealis Financial Planning we can help you to calculate how much you can contribute and if you need to declare anything to HMRC.
Can I still contribute to my pension after taking income from my pension?
If you have started to take any income from your pension then your pension annual allowance will reduce to £10,000 per year for any future savings. Anything over £10,000 will not benefit from tax relief.
Can I contribute to a pension if I am not working?
If you are unemployed you can contribute up to £2,880 to a pension each tax year. This amount receives tax relief of 20% which tops up your contribution to £3,600 in total.
This amount can also be contributed to a child’s pension.
Make the most of your pension
Pension rules and allowances are complex and the rules change frequently. At Borealis Financial Planning, we can help you to understand which tax reliefs and allowances apply to your personal circumstances so you can make the most from your pension. You can book a no-obligation meeting using the form below. Meetings generally take one hour and can be at your home address, at one of our offices or on zoom.
The value of an investment with St. James's Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.
The levels and bases of taxation, and reliefs from taxation, can change at any time and are dependent on individual circumstances.
SJP Approved 03/10/2025