UK households being handed £60,000 tax-free allowance from HMRC
You can usually get tax relief on contributions up to the higher of your UK relevant earnings or £3,600. There is an annual allowance of up to £60,000 (2025/26). Although you can claim tax relief on contributions up to the value of your UK relevant earnings, the amount of tax relief you can keep is limited by the annual allowance.
The Low Incomes Tax Reform Group advises: "For people with high incomes, the annual allowance can be lower than £60,000. We do not cover this on our website – you can find out more on GOV.UK.
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"If the increase in the value of your pension rights or your pension contributions in a tax year (including employer contributions) exceeds the annual allowance, there is a tax charge on the excess. The rate of the annual allowance tax charge is at your marginal rate of tax and so depends on the level of your taxable income.
"This means that to get full tax relief, the amount paid into all your pensions by you or on your behalf (including contributions made by your employer) cannot exceed £60,000.
"In some cases, you might be able to carry forward unused annual allowance from the previous three tax years, subject to certain conditions. We do not go into detail of the upper annual allowance limits here as they only tend to affect those on higher incomes."
If your adjusted income is over £260,000 your annual allowance in the current tax year will be reduced. It will not be reduced if your threshold income for the current tax year is £200,000 or less, no matter what your adjusted income is.
For every £2 your adjusted income goes over £260,000, your annual allowance for the current tax year reduces by £1. The minimum reduced annual allowance you can have in the current tax year is £10,000. For tax years up to and including 2022 to 2023 the threshold income and adjusted income limits are different.
If the pension savings made in the tax year are more than your available annual allowance, you should include the excess amount on your Self Assessment return. Your available annual allowance is your reduced annual allowance plus any unused allowance from the previous 3 tax years.
This amount is added to your taxable income and you will pay Income Tax on it, at the tax rate that applies to you.
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