Pension tax guide
What happens if I exceed my pension annual allowance?
If your pension saving exceeds your available annual allowance, an annual allowance tax charge can arise. The calculation is personal and should take account of carry forward, tapering, the MPAA and all relevant pension input before assuming a charge is due.
The basic rule
A charge can arise when pension input exceeds your available annual allowance.
HMRC states that pension savings above the annual allowance can be subject to an annual allowance tax charge. For 2026/27, the standard annual allowance is £60,000.
Your available allowance can be lower if the tapered annual allowance or Money Purchase Annual Allowance applies, or higher where valid carry forward is available.
The calculation must consider all relevant pension input for the tax year and your actual available allowance.
Tax calculation
The annual allowance charge is based on your marginal Income Tax position.
HMRC describes the annual allowance charge as a tax charge on the individual. Broadly, the excess pension saving is added through the annual allowance calculation and taxed at the individual's relevant marginal Income Tax rate or rates.
Your income and tax bands matter, so two people with the same pension excess can have different tax charges.
Before accepting a charge
Check whether carry forward reduces or removes the excess.
Unused annual allowance from the previous three tax years can sometimes be carried forward. For a 2026/27 calculation, the relevant earlier years are 2023/24, 2024/25 and 2025/26.
The current year's allowance is used first, then valid unused allowance from the oldest available year is used next.
If the Money Purchase Annual Allowance has been triggered, unused prior-year allowance cannot simply be used to increase the £10,000 2026/27 MPAA for money-purchase saving.
Paying the charge
You may pay the charge yourself or, in some cases, through the pension scheme.
MoneyHelper explains that an annual allowance charge can be paid personally, or a pension scheme may pay some or all of it under Scheme Pays.
You must still report the annual allowance charge to HMRC through Self Assessment where required, including where a pension scheme pays the charge on your behalf.
Scheme Pays
What does Scheme Pays mean?
Scheme Pays allows a pension scheme to pay an annual allowance tax charge on your behalf, with a corresponding reduction to your pension benefits.
Mandatory Scheme Pays
Where the statutory conditions are met, the scheme must pay the relevant amount if a valid election is made.
Voluntary Scheme Pays
Some schemes may agree to pay even where they are not legally required to do so. Scheme rules differ.
HMRC confirms that where the scheme pays the liability, the member's pension benefits must be adjusted to reflect the amount paid.
The tax is settled by the scheme, but your eventual pension benefits are reduced to reflect that payment.
Next steps
Work through the calculation before changing future contributions.
1. Confirm total pension input
Include all relevant defined contribution input and any defined benefit pension-input amounts.
2. Confirm your real allowance
Check tapering, MPAA and any available carry forward.
3. Calculate the charge
Apply the relevant tax-rate calculation rather than assuming the excess is taxed at one fixed rate.
4. Check Scheme Pays
Ask the pension scheme whether mandatory or voluntary Scheme Pays is available and what deadlines apply.
5. Report correctly
Make sure the charge is reflected through Self Assessment and that any Scheme Pays election is recorded correctly.
6. Review future saving
Adjust contributions only after understanding whether the issue arose from tapering, MPAA, one-off employer funding or another factor.
Personal pension planning
Think you may have exceeded your annual allowance?
A personal calculation can establish the pension input, available allowance, carry forward and whether an annual allowance tax charge is actually due.
Book a conversationThis guide is for general information only and is not personal financial or tax advice. Annual allowance and Scheme Pays calculations can be complex and deadlines can apply. Content checked against current HMRC/GOV.UK and MoneyHelper guidance on 15 September 2026.