The Tapered Annual Allowance for High Earners
Written and reviewed by the Pension Tax Accountants editorial team. Last reviewed 29 July 2026.
The tapered annual allowance reduces the standard £60,000 annual allowance for higher earners. It can pull the allowance down to £10,000, which sharply raises the chance of an annual allowance charge if contributions carry on as normal.
The taper is governed by two separate income tests, and both have to be failed before it bites. Missing that point is the most common mistake, because a large one-off contribution or bonus can push someone over one line but not the other.
Who the Taper Applies To
The taper applies for 2026/27 only where your threshold income is over £200,000 and your adjusted income is over £260,000. Both conditions have to be met. If your threshold income is £200,000 or less, the taper does not apply no matter how high your adjusted income is.
That two-test structure is deliberate. The threshold income test is meant to keep people with modest incomes but a single large pension input out of the taper, so the adjusted income figure only matters once threshold income is above £200,000.
Threshold Income and Adjusted Income
Threshold income is broadly your taxable income for the year less your gross personal pension contributions, with certain salary sacrifice arrangements set up after 8 July 2015 added back. Adjusted income is broadly your taxable income plus all pension inputs, including employer contributions.
The two figures start from the same place and then move in opposite directions, one taking pension contributions out and the other putting all of them in. HMRC sets out the full definitions in its tapered annual allowance guidance.
How the Allowance Tapers Down
Once both tests are failed, the allowance falls by £1 for every £2 of adjusted income above £260,000. The reduction stops at a minimum allowance of £10,000, which is reached once adjusted income hits £360,000. Above that level the allowance stays at £10,000 however high income goes.
The mechanics of the reduction sit in the Finance Act 2004. Working out where you land on the scale means pinning down both income figures accurately first, because a small change in adjusted income moves the allowance by half as much again.
The Interaction with Carry Forward
A tapered allowance in the current year does not stop you using carry forward. Unused allowance from the previous three years can still be brought in, and in a tapered year it is often what keeps a contribution within the rules.
Any carried-forward year that was itself tapered is only available at its own reduced figure, so the history of your allowances matters as much as the current year.
Getting the Two Tests Right
Because the taper turns on two income figures that most payslips do not show directly, the calculation is where errors creep in. We work out both figures, apply the taper and, where a charge arises, report it through Self Assessment.
Deciding whether to contribute at all, or how to structure your affairs, remains regulated financial advice for an FCA authorised adviser. Our part is the tax measurement and the reporting.