UK Pension Tax Relief Guide (2026/27)

Pension tax relief is the single most generous personal tax relief available in the UK system. This page goes deep on the full mechanics: the three contribution methods (Net Pay, Relief at Source, salary sacrifice), the £60,000 Annual Allowance and how it tapers for higher earners, the £10,000 Money Purchase Annual Allowance, carry forward of unused prior-year allowance, the post-LTA Lump Sum Allowance and Lump Sum and Death Benefit Allowance, defined benefit valuation, workplace auto-enrolment, and the anti-avoidance rule on pension recycling. Every figure traces back to the gov.uk Pension Tax Manual or HMRC published guidance.

1. Overview

A pension contribution buys you three concurrent benefits the UK tax system offers nowhere else in combination: an up-front Income Tax saving at your marginal rate (20%, 40% or 45% for the rest of the UK; 19% to 48% in Scotland), an NI saving if you contribute via salary sacrifice (8% employee plus 15% employer), and tax-free growth of the invested fund inside the pension wrapper until you draw it down. The trade is that the money is locked away until age 57 (rising to 58 from April 2028 per current legislation), at which point 25% is available as a tax-free lump sum and the remaining 75% is taxed as pension income at your marginal rate of the year you withdraw it.

The arithmetic is brutally favourable. A higher-rate taxpayer on salary sacrifice giving up £100 of gross pay puts £100 into the pension wrapper (or £115 once a typical employer NI pass-back is included) at a personal cash cost of about £58 of foregone take-home. That is a roughly 70% boost on day one before any investment growth. For additional-rate payers the ratio is even better. Pension contributions are also the cleanest way to dodge the 60% Personal Allowance taper between £100,000 and £125,140 and the 71% effective marginal rate that HICBC layers on top between £60,000 and £80,000 of household income. This page is the technical reference; for a broader tax-relief survey see the full tax relief guide, and to run your own numbers use the pension contribution calculator.

2. The three relief methods

How your pension contribution reaches the pot dictates which taxes are relieved, when the relief lands, and whether you need to do anything to claim it. The three UK methods are structurally different even when they produce similar end-state pots.

a. Net Pay Arrangement (NPA)

Under a Net Pay Arrangement the employer deducts the pension contribution from your gross salary before running PAYE Income Tax. You pay Income Tax on the salary that remains. The relief is automatic at your full marginal rate including higher and additional-rate bands: you never see the money so HMRC never taxes it. Net Pay is the default in most occupational defined benefit schemes (NHS Pension Scheme, Teachers' Pension Scheme, Civil Service alpha, Police 2015, Local Government Pension Scheme) and in many occupational defined contribution schemes.

Worked example. Gross salary £50,000, 5% employee pension contribution under Net Pay. The pension deduction is £2,500. Taxable salary becomes £47,500. Income Tax is calculated on £47,500 rather than £50,000, saving £500 of Income Tax (20% of £2,500) for a basic-rate payer. For a higher-rate payer the same £2,500 contribution saves £1,000 of Income Tax (40%) automatically with no further action needed. Net Pay does NOT relieve employee National Insurance: NI is still calculated on the pre-pension £50,000. That is the structural difference vs salary sacrifice. The Low-Income Net Pay Anomaly (workers earning below the Personal Allowance get no Income Tax relief on Net Pay contributions, while RAS gives them 20% top-up) was partially fixed by a top-up scheme that started in 2024-25, paid retrospectively each November.

b. Relief at Source (RAS)

Under Relief at Source you contribute from net (post-tax) pay. The provider grosses up by reclaiming 20% basic-rate relief from HMRC and adds it to your pot. You contribute £80 net and £100 lands in the pension. RAS is the default for personal pensions, stakeholder pensions, Self-Invested Personal Pensions (SIPPs), and a growing share of workplace defined contribution schemes (Smart Pension, Aviva Smart Sustainable Future, Nest's RAS variant).

Higher-rate top-up. RAS only grants 20% at source. Higher and additional-rate taxpayers must claim the extra 20% or 25% themselves through Self Assessment or by writing to HMRC. The mechanism is an extension of the basic-rate band by the gross contribution. Example: £80 net contribution = £100 gross. A £100 gross contribution extends the basic-rate band by £100, so £100 of income that would have been taxed at 40% drops to 20%. The extra 20% is worth £20 on a £100 contribution. The taxpayer's overall position is identical to Net Pay relief, but they have to claim it. Around an estimated £1bn per year of higher-rate relief goes unclaimed because PAYE employees who do not file Self Assessment forget to ring HMRC. You can backdate claims up to four tax years.

Worked example. Higher-rate taxpayer paying £4,000 net into a SIPP. Provider grosses up to £5,000 (20% reclaimed). HMRC owes the taxpayer another £1,000 via SA (the higher-rate top-up). Effective personal cost: £3,000 for £5,000 in the pot - a 67% bonus before any investment growth. Additional-rate payers get an additional £250 (5%) on the same £5,000, lowering personal cost to £2,750.

c. Salary Sacrifice

Salary sacrifice is a contractual reduction in gross salary in exchange for an equivalent employer pension contribution. Because the money never reaches you as salary, it does not attract Income Tax (relief at full marginal rate) AND it does not attract employee NI (8% main, 2% above UEL) AND it does not attract employer NI (15% above the £5,000 Secondary Threshold from April 2025). Many employers contractually share some or all of the employer NI saving back into the pension pot, which is "free money" relative to Net Pay or RAS.

Worked example. Gross salary £50,000. Sacrifice £5,000 into pension. New contractual salary £45,000. Pension receives £5,000 plus (if the employer passes back the 15% employer NI saving of £750) potentially £5,750 total. Personal cash position: you give up about £3,300 of net pay (after foregone 40% Income Tax and 2% employee NI on the slice above the UEL, for someone in the higher-rate band) to put £5,000-£5,750 into pension. That is a roughly 70-75% bonus on day one. For a basic-rate payer the saving is smaller but still meaningful (Income Tax 20% + employee NI 8% = 28% personal saving plus employer NI pass-back).

Salary sacrifice is mathematically the best mechanism for almost every taxpayer above the Personal Allowance, and is transformative for anyone in the 60% PA-taper band (£100,000 to £125,140), the HICBC band (£60,000 to £80,000 household), or the 45% additional-rate band. For modelling see the salary sacrifice calculator and the salary sacrifice vs RAS comparison. The main practical limit is that some lenders historically treated post-sacrifice salary as the mortgage figure, though most major UK lenders now accept gross-equivalent salary if the salary-sacrifice agreement is non-revocable and the pension contribution is documented on payslips.

3. Annual Allowance

The Annual Allowance (AA) is the headline cap on tax-relieved pension input per tax year. The standard AA is £60,000 for 2026/27 - raised from £40,000 to £60,000 from 6 April 2023 by Spring Budget 2023, and unchanged since. The AA covers the combined total of:

The AA is per tax year (6 April to 5 April), not per provider. Contributions across all your pensions combined count against the single £60,000 figure. The AA runs separately from your relevant UK earnings cap: personal contributions still cannot exceed 100% of your relevant UK earnings (or £3,600 gross for non-earners) regardless of how much AA you have spare. Employer contributions are not capped by earnings - the AA is the only limit on those.

Excess contributions. Going over the AA triggers an Annual Allowance tax charge at your marginal Income Tax rate, applied as if the excess were additional taxable income on top of your salary. For an additional-rate payer the charge can reach 45%. The charge is declared on Self Assessment. The pension input itself is not "rolled back" - the money stays in the pot - but the relief is effectively clawed back by the charge.

Scheme pays. If the AA charge exceeds £2,000 and the pension input to a single scheme exceeded the standard £60,000 AA, you can elect for the scheme to pay the charge from your pension benefits instead of out of your own cash. This is "mandatory scheme pays" and the scheme must accept it. For amounts below those thresholds, voluntary scheme pays is available at trustee discretion. The election is made on Self Assessment by 31 July of the year after the year of the charge (so 31 July 2028 for 2026/27). Scheme pays reduces your future pension benefits proportionally; it does not eliminate the charge. Model it with the pension annual allowance calculator.

4. Tapered Annual Allowance

For high earners the £60,000 AA tapers down according to two income tests. The taper is the chief reason senior NHS consultants, GP partners, judges and senior civil servants breach the AA on routine promotions and pay rises.

Threshold income test. Threshold income is broadly your total taxable income minus your own pension contributions (excluding employer contributions, which is what makes this test useful as a gate). If threshold income is £200,000 or below, no taper applies at all no matter how high your adjusted income climbs. This is the protective gate added in April 2020 to stop NHS consultants with high employer pension input being caught by taper on modest salaries.

Adjusted income test. Adjusted income is your threshold income PLUS all pension contributions (both your own and your employer's, including DB accrual valued via the 16:1 factor) PLUS the cash value of any taxable benefits in kind. If adjusted income is over £260,000 AND threshold income is over £200,000, the AA tapers down by £1 for every £2 of adjusted income above £260,000. The taper floor is £10,000 (raised from £4,000 in April 2023), reached at adjusted income of £360,000 and above.

Worked example. Consultant on a £180,000 NHS salary, paying 14.5% employee contribution (£26,100) under Net Pay, with £35,000 of employer pension input (notional, via the DB 16:1 factor). Threshold income is £180,000 minus £26,100 = £153,900 - below £200,000, so no taper applies. AA stays at the full £60,000. Same consultant after a promotion to £230,000 salary with £33,350 employee contribution and £42,000 employer input: threshold income becomes £196,650 (still below £200,000) so still no taper. Bump to £250,000 salary and the threshold finally crosses £200,000; adjusted income is around £321,000, so the taper reduces AA by (321,000 - 260,000) / 2 = £30,500 down to £29,500.

Common traps. Bonuses paid in March can flip the threshold-income test from "under £200k" to "over £200k" and retroactively re-apply taper that wiped out a year of planning. Carry forward from prior years remains available even when current-year AA is tapered, which is often the escape hatch. Salary sacrifice still works under taper: the sacrifice reduces threshold income (because the money never reaches you as salary) which can drop someone back below the £200,000 gate.

5. Money Purchase Annual Allowance

The Money Purchase Annual Allowance (MPAA) is a permanent reduction in the AA from £60,000 to £10,000 for defined contribution pension input, triggered once you flexibly access a DC pot. The MPAA was £4,000 from April 2017 to April 2023 and was raised to £10,000 at Spring Budget 2023.

What triggers the MPAA?

What does NOT trigger the MPAA?

How it works in practice. Once MPAA is triggered, your DC contributions are capped at £10,000 a year. The remaining £50,000 (£60,000 standard AA minus the £10,000 MPAA) is available for defined-benefit accrual only - relevant for people who semi-retire from a DC pot but continue NHS or LGPS service. Importantly, you cannot use carry-forward against the MPAA; carry-forward only protects the residual £50,000 DB element. The MPAA is permanent - once triggered it cannot be reversed, so the timing of the first DC drawdown deserves careful thought.

6. Carry forward

Unused Annual Allowance from the previous three tax years can be carried forward and used in the current year. Carry forward effectively quadruples the maximum single-year contribution from £60,000 to potentially £240,000, though relief is still capped by 100% of relevant UK earnings.

Membership requirement. To carry forward from a given year, you must have been a member of a registered UK pension scheme in that year. Mere membership (eg a deferred employer pension you have not contributed to) is sufficient. The rule blocks new pension entrants from claiming hypothetical AA from years before they were in any scheme.

Order of use. The current year's AA is used first. Once the current AA is exhausted, the oldest carry-forward year is used first, then the next, then the most recent. Allowance from the year three years prior drops off permanently at the end of the current year. Carry forward is automatic - there is no election or form.

Worked example. A taxpayer in 2026/27 (2026-27) with the following history of pension input:

Maximum contribution in 2026-27 = current £60,000 AA + £20,000 from 2023-24 + £0 from 2024-25 + £20,000 from 2025-26 = £100,000 gross. That total still requires £100,000 of relevant UK earnings to attract full tax relief. After 5 April 2027, the £20,000 from 2023-24 drops off and the maximum reverts to £60,000 + £0 + £20,000 = £80,000 (plus whatever remains from 2024-25 onwards). Carry forward is one of the sharpest planning levers for high earners with episodic bonuses or business-sale proceeds; model it with the pension annual allowance calculator.

7. Lifetime Allowance abolished: LSA and LSDBA

The Lifetime Allowance (LTA) was abolished from 6 April 2024 by Finance (No 2) Act 2023. From that date the LTA charge was set to 0% (transitional in 2023-24) and then the entire LTA framework was removed and replaced by two new lifetime caps on tax-free amounts paid out of pensions.

Lump Sum Allowance (LSA): £268,275. This is the maximum total of tax-free cash you can take across all your pensions in your lifetime. £268,275 is exactly 25% of the old £1,073,100 LTA. Each time you take a tax-free Pension Commencement Lump Sum (PCLS) or a tax-free portion of UFPLS, it eats into your LSA. Once the LSA is exhausted, further "tax-free" lump-sum payments are taxed as pension income at your marginal Income Tax rate of the year of withdrawal.

Lump Sum and Death Benefit Allowance (LSDBA): £1,073,100. This is the wider cap on tax-free lump sums plus serious-ill-health lump sums plus death-benefit lump sums combined. Set at the old LTA value, the LSDBA becomes relevant when a pension is paid out as a lump sum on death before age 75, or as a serious-ill-health lump sum. Amounts above the LSDBA are taxed at the beneficiary's marginal Income Tax rate.

Transitional protections retained. Holders of pre-2024 LTA protections (Fixed Protection 2012, 2014, 2016; Individual Protection 2014, 2016; Primary Protection; Enhanced Protection) keep their protected personal LSA and LSDBA at higher levels, scaled to 25% of their protected LTA. Anyone with a Fixed Protection 2016 (protected LTA £1,250,000) retains a personal LSA of £312,500 and a personal LSDBA of £1,250,000. The detailed transitional rules are at gov.uk in the Lifetime Allowance pre-2024 information collection.

What changed practically. Before April 2024, a pension fund above £1,073,100 triggered a 25% LTA charge on crystallisation if drawn as income, or 55% if drawn as a lump sum. From April 2024 onwards, the fund size itself has no tax consequence; only the LSA and LSDBA on lump-sum payments matter. People with very large DC pots (£2m, £3m, £5m) can now hold the entire balance inside the wrapper and draw at their marginal rate without any "excess" charge. Estate planning has shifted accordingly, helped further by the announcement that DC pensions will be inside the IHT estate from April 2027 (Autumn Statement 2024).

8. Tax-free lump sum (PCLS)

The Pension Commencement Lump Sum (PCLS) is the formal name for the 25% tax-free cash available at retirement. You can take up to 25% of each pension pot tax-free at the point of crystallisation, capped by your remaining LSA (£268,275 standard, higher under transitional protection). The remaining 75% of the crystallised slice goes into drawdown, annuity or UFPLS and is taxed as pension income when drawn.

Mechanics. The 25% test is applied at the moment of crystallisation, not lifetime. So a £400,000 pot crystallised in full pays out £100,000 PCLS tax-free; a £400,000 pot only partially crystallised at £100,000 pays out £25,000 PCLS tax-free now and £75,000 PCLS available later if and when the rest is crystallised. Partial crystallisation is the standard strategy for managing marginal rates across retirement years.

UFPLS (Uncrystallised Funds Pension Lump Sum) is an alternative whereby each chunk you draw is 25% tax-free and 75% taxed as pension income. UFPLS triggers the MPAA. PCLS-only withdrawal (taking the 25% without crystallising any taxable income) does not trigger the MPAA. Most retirees choose a blend depending on their tax position each year - one of the more granular planning levers available.

9. Workplace auto-enrolment

Auto-enrolment is the mandatory UK workplace pension regime legislated by the Pensions Act 2008, fully phased in by February 2018. Every employer with at least one eligible jobholder must enrol them in a qualifying workplace pension and pay minimum contributions.

Eligibility. An "eligible jobholder" is anyone aged 22 to State Pension age, working in the UK, earning at least £10,000 a year. Workers earning between the Lower Earnings Limit (£6,240) and £10,000 have the right to opt in but are not auto-enrolled. Below the LEL, workers can join but the employer is not required to contribute. The £10,000 trigger has been frozen since 2014.

Minimum contributions on qualifying earnings. The default contribution structure is based on "qualifying earnings": the band of pay from £6,240 to £50,270 in 2026/27. Minimums:

Many employers exceed the statutory minimum on a "matched" basis (5% employee matched by 5% employer, for example) and base it on full salary rather than the qualifying-earnings band, which produces a materially higher pot. The Pensions Regulator publishes detailed compliance guidance. See the workplace pension auto-enrolment guide for opt-out mechanics, re-enrolment cycles (every three years) and the postponement rules.

10. Personal pensions and SIPPs

Personal pensions and Self-Invested Personal Pensions (SIPPs) sit outside the workplace pension regime. They are HMRC registered DC schemes you open directly with a provider, with RAS tax relief, and they are the standard wrapper for consolidating old workplace pots, for self-employed contributions, and for higher-rate / additional-rate taxpayers who want to top up their workplace pension with additional personal contributions.

SIPPs specifically give you a much wider investment universe than a default workplace DC fund: individual UK and US equities, investment trusts, ETFs, open-ended funds, commercial property (with structural restrictions) and structured products. The trade-off is higher complexity and the responsibility to manage asset allocation. SIPP platform fees are typically 0.15% to 0.45% a year of assets, plus fund OCFs, plus dealing commissions on shares - cheaper SIPPs (Vanguard SIPP, InvestEngine, AJ Bell) cluster nearer 0.15-0.25%.

Tax relief mechanics. Personal pension and SIPP contributions use RAS by default. You contribute net, the provider claims 20% back, higher-rate top-up is via SA. The £60,000 AA applies, taper applies for high earners, MPAA applies once you start flexibly drawing. There is no difference in tax treatment between a "personal pension" and a "SIPP" - the difference is the investment platform and product range. Both are registered pension schemes under Part 4 Finance Act 2004.

11. Defined Benefit pensions in tax context

Defined benefit (DB) pensions pay a guaranteed annual income in retirement based on a formula (final salary or career average), not on the size of an underlying pot. They are now rare in the private sector outside of legacy schemes, but they dominate the UK public sector: NHS Pension Scheme, Teachers' Pension Scheme, Civil Service alpha, Local Government Pension Scheme, Police 2015, Fire 2015, Armed Forces 2015. For Annual Allowance purposes, DB accrual is converted into a notional cash value using a standard formula.

The 16:1 input factor. The annual increase in your DB pension entitlement is multiplied by 16 to produce the "pension input amount" against the AA. If your DB pension entitlement rises by £4,000 a year over the tax year (from £20,000 to £24,000 of annual pension), the input is 16 x £4,000 = £64,000 - already above the standard AA. Schemes with a separate tax-free lump sum (the old NHS 1995 Section, the Civil Service classic scheme) add 1:1 of the lump-sum increase on top. The 16:1 factor was set when CPI was low and gilt yields were higher; in current rate conditions the "real" actuarial cost of buying £4,000 a year of inflation-linked pension is materially higher than £64,000, which means the 16:1 valuation actually understates the true value of public-sector DB schemes.

CPI revaluation adjustment. The opening value of your DB pension at the start of the tax year is uprated by CPI before being compared to the closing value. This stops paper-only inflation increases from triggering AA charges. The revaluation matters because under CARE schemes, the accrued benefits are revalued each year by CPI plus a scheme-specific factor (1.5% under NHS 2015, for example). The opening-value CPI uplift exactly offsets the CPI component of the revaluation, leaving only the real-terms accrual to count against AA.

Senior promotion blow-up. A consultant moving up the Spine Points to a clinical director role, or a civil servant promoted from SCS1 to SCS2, can experience a single-year DB input of £80,000 to £150,000+ as the final salary multiplier ratchets across many years of service. Scheme pays is the usual response. The 2019-2020 NHS consultant overtime crisis (consultants refusing extra sessions to avoid AA charges) was triggered exactly by this mechanism, and the AA standard cap was raised from £40k to £60k in April 2023 in direct response.

12. Cross-tax-year planning

The 5 April tax-year boundary is a hard deadline for several pension levers. Contributions on or before 5 April count against this year's AA and this year's relevant UK earnings. Contributions on or after 6 April count against next year. For employer contributions including salary sacrifice the payment date is the trigger, so your March or April payroll run is the practical cut-off.

Threshold-driven year-end timing. If income this year has crossed a tax threshold and a pension contribution would push you back below it, the contribution is worth materially more this year than next:

Worked example. Senior manager on £105,000 salary, no employer pension. Adjusted net income is £105,000, Personal Allowance is reduced by £2,500 (half of the £5,000 excess over £100,000). Pension contribution of £5,000 gross (RAS net £4,000 with HMRC reclaim) drops adjusted net to £100,000, restoring the full PA. Income Tax saving: higher-rate relief 40% of £5,000 = £2,000, plus PA restoration worth (£2,500 PA x 40%) = £1,000. Total relief £3,000 on a £4,000 net cost - a 75% bonus before investment growth, achievable only because the timing crosses the £100k gate. Model the trap with the 60% tax trap calculator.

13. Pension recycling: do not

Pension recycling is HMRC's term for using a tax-free PCLS to fund significantly increased pension contributions, then claiming new tax relief on those contributions. It is explicitly anti-avoidance territory. The rules are in PTM133810 of the Pensions Tax Manual and have been actively enforced since they were introduced in 2006.

The five tests. HMRC will treat a contribution as recycling, and apply unauthorised payment tax, if ALL of these are true:

Penalty. If HMRC determines recycling, the excess contribution becomes an "unauthorised member payment" taxed at 40% on the recipient (you), with an additional 15% surcharge if the unauthorised payment exceeds 25% of the pension fund. The scheme can also face a 15-40% scheme sanction charge. The total combined tax can reach 70% of the original payment - punitive by design.

Practical takeaway. Taking PCLS and separately continuing your normal contribution pattern is fine. Taking PCLS and using it to immediately fund a much larger contribution is not. If you genuinely need to ramp up contributions (eg unexpected business sale proceeds, large bonus, inheritance), document the unrelated source of funds clearly and keep the contribution pattern proportional to that source rather than to the PCLS itself. When in doubt consult a pensions adviser - the 70% combined penalty is severe enough that the cost of advice is trivial in comparison.

14. Related tools and guides

Cross-references and modelling tools across the SalaryTax pension stack:

Frequently asked questions

How much pension contribution gets 40% tax relief?
Higher-rate (40%) tax relief is available on the portion of a pension contribution that sits inside your 40% Income Tax band. For the rest of the UK in 2026/27 that band runs from £50,270 to £125,140 of taxable income, so any contribution that drops your taxable pay through this slice attracts 40% combined relief. Example: a £70,000 salary contributing £10,000 gross via salary sacrifice or net-pay drops taxable income to £60,000 - the whole £10,000 was inside the 40% band, so the relief is £4,000 of Income Tax plus 2% employee NI (since this slice is above the Upper Earnings Limit). Anything contributed below £50,270 of taxable income only gets 20% basic-rate relief. Scotland adds a 42% intermediate higher rate from £43,663 and a 45% advanced rate from £75,000, with slightly different break points.
Do I need to claim higher-rate pension relief via Self Assessment?
It depends on the contribution method. With Net Pay or salary sacrifice, the relief is fully automatic at your marginal rate and there is nothing to claim - the pension comes off gross pay before PAYE applies. With Relief at Source (the default for personal pensions, SIPPs and many workplace defined contribution schemes) the provider only reclaims 20% basic-rate relief from HMRC; the extra 20% (higher-rate) or 25% (additional-rate) must be claimed separately. Higher-rate taxpayers without other Self Assessment triggers can ring HMRC or write in to extend the basic-rate band by the gross contribution. If you already file Self Assessment, complete box 1 (or 1.1) on the pension page. You can backdate claims up to four years.
What is "scheme pays"?
Scheme pays is a mechanism that lets the pension scheme settle an Annual Allowance tax charge from your pension pot rather than out of your own bank account. Mandatory scheme pays applies if the total AA charge exceeds £2,000 and your pension input to that single scheme exceeded the standard £60,000 Annual Allowance. The scheme must accept it; in exchange your future benefits are reduced. Voluntary scheme pays is available below the £2,000 / £60,000 thresholds at the trustees' discretion. The election is made on the Self Assessment return by the deadline of 31 July following the year after the tax year (so 31 July 2028 for 2026/27). It does not eliminate the charge - it just spreads the cost by reducing pension benefits instead of demanding cash now.
Can I carry forward more than 3 years?
No. Unused Annual Allowance can be carried forward from the previous three tax years only, in chronological order (oldest first). You must have been a member of a registered UK pension scheme in each of those years (membership is enough - no contribution requirement). Allowance from earlier years drops off permanently at the end of the current year. Combining the full £60,000 current AA with three prior years at £60,000 gives a theoretical maximum contribution of £240,000 in one tax year, although the relief itself is still capped by your relevant UK earnings for the year (you cannot get tax relief on contributions above 100% of UK earnings, with a small £3,600 floor for non-earners).
What is the new Lump Sum Allowance after LTA abolition?
The Lifetime Allowance was abolished from 6 April 2024 and replaced by two separate caps. The Lump Sum Allowance (LSA) is £268,275 - the maximum tax-free cash you can take across all your pensions in your lifetime, equal to 25% of the old £1,073,100 LTA. The Lump Sum and Death Benefit Allowance (LSDBA) is £1,073,100 - a wider cap on tax-free lump sums plus serious-ill-health and death-benefit lump sums combined. Holders of pre-2024 LTA protections (Fixed Protection 2016, Individual Protection 2016 and so on) retain higher personal allowances, with the LSA scaled to 25% of their protected figure. Excesses above the LSA are taxed as pension income at the recipient's marginal rate, replacing the old 25% / 55% LTA charges.
Does NHS pension count toward the Annual Allowance?
Yes. NHS Pension Scheme accrual (defined benefit) is valued using the standard 16:1 input factor: the increase in your annual pension over the tax year is multiplied by 16, plus the increase in any lump sum, with a CPI revaluation adjustment applied to the opening value. A senior NHS consultant or GP picking up extra sessions can easily generate £60,000+ of pension input on paper without ever seeing a contribution leave their bank account - which is why the NHS Pension Scheme was central to the 2020s consultant retention crisis and why HMT raised the standard AA from £40k to £60k and the tapered AA floor from £4k to £10k in April 2023. NHS scheme pays is well-established and widely used.
How is a DB pension valued for AA purposes?
Defined benefit pension input for Annual Allowance purposes uses a 16:1 valuation factor. Take the annual pension at the start of the tax year, uprate it by CPI to remove inflation, multiply by 16, and that is the opening value. Compare with the annual pension at the end of the year (no CPI adjustment) multiplied by 16. Add any separate tax-free lump sum entitlement to each side. The difference between the closing and opening values is the pension input amount for that scheme. Career-average revalued earnings (CARE) schemes like NHS 2015, Teachers' Career Average, alpha Civil Service and the police 2015 scheme all use this formula.
What is the MPAA and what triggers it?
The Money Purchase Annual Allowance is a reduced AA of £10,000 (raised from £4,000 in April 2023) that caps how much you can contribute to a defined contribution pension once you have flexibly accessed a DC pot. Triggers include taking any taxable income from flexi-access drawdown, taking an Uncrystallised Funds Pension Lump Sum (UFPLS), or exceeding the cap on a capped drawdown plan. Taking only the 25% tax-free Pension Commencement Lump Sum does NOT trigger the MPAA. Buying a guaranteed-income annuity does NOT trigger it. The MPAA bites only on DC contributions; defined-benefit accrual continues to use the standard £60,000 AA (less any DC contributions counted against the MPAA). Once triggered, the MPAA is permanent.
Can I sacrifice into pension if I am over 75?
Mechanically yes, but tax relief on personal contributions stops at age 75. Employer contributions can still be paid in (and are still deductible for the employer), and contributions can still be invested tax-efficiently inside the wrapper. But individual contributions made by you after your 75th birthday do not attract any tax relief and count against the AA without any of the usual benefit. Most pension professionals advise reviewing the contribution strategy in the run-up to age 75 - finishing carry-forward, using last-minute contributions for higher-rate relief, and switching to drawdown or annuity planning. Death benefits tax also changes meaningfully at 75: lump-sum death benefits to a beneficiary become taxable as pension income rather than tax-free.
What is salary sacrifice and is it always better than RAS?
Salary sacrifice is an arrangement where you formally agree to a reduced contractual salary and the employer pays the foregone amount directly into your pension. Because the income never reaches you, it does not attract Income Tax or employee NI (8% main, 2% above the Upper Earnings Limit) and the employer saves the 15% employer NI as well. Many employers share some or all of the employer NI saving back into your pot. Compared to Relief at Source it is materially better for any rate-payer, and dramatically better for higher and additional-rate payers. The two cases where RAS or Net Pay can be preferable: very low earners below the Lower Earnings Limit (where dropping further could reduce State Pension qualifying years) and anyone whose mortgage application is imminent (some lenders count gross salary, not post-sacrifice salary, but this is changing).
When should I make a pension contribution before tax year end?
If a contribution between now and 5 April would either restore your Personal Allowance (income crossed £100,000), avoid HICBC (household income crossed £60,000), avoid the 45% additional rate (taxable income crossed £125,140) or use spare Annual Allowance from a prior carry-forward year about to drop off, the contribution is materially more valuable made before 5 April than in the new tax year. Personal contributions made on or before 5 April count against this year's AA and against this year's relevant UK earnings. Employer contributions count in the year they are physically paid, so a payroll cut-off in late March is the practical deadline for salary sacrifice timing.

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  frameborder="0"
  loading="lazy"
  title="UK Salary Calculator by SalaryTax"
  style="border: 1px solid #e0e0e0; border-radius: 4px;"
></iframe>
 
 
 
 Compact embed  
 
<iframe
  src="https://salarytax.uk/embed/salary-calculator-compact"
  width="100%"
  height="380"
  frameborder="0"
  loading="lazy"
  title="UK Salary Calculator (compact) by SalaryTax"
  style="border: 1px solid #e0e0e0; border-radius: 4px; max-width: 560px;"
></iframe>
 
 
Full embed docs and live preview →