Pension Carry Forward: How to Pay in More Than £60,000 This Year
Pension Carry Forward: How to Pay in More Than £60,000 This Year
The pension annual allowance for 2026/27 is £60,000, but that is not the most you can pay in this year without a tax charge. Carry forward lets you use allowance you did not use in the previous three tax years, so someone who paid in little recently may be able to contribute well over £100,000 this year with full tax relief.
The catch is the deadline. Unused allowance from 2023/24 can only be used until 5 April 2027. After that it is gone for good. Here is who carry forward suits, how the rules work, and how to use it safely.
Try it yourself: the Pension Carry Forward Calculator works out your unused allowance year by year, the order it is used in, and when each year's allowance expires.
Who carry forward is for
Most people never need it: £60,000 a year is far more than a typical saver pays in. Carry forward matters when a large amount of money arrives in one year:
- Company directors who can have their limited company pay a large employer contribution in a profitable year.
- Bonus earners with a large bonus who want to stop it falling into the 40%, 45% or 60% bands.
- The self-employed with a strong year of trading profit after several lean ones.
- People selling a business, who want to extract value into a pension before or around the sale.
- Anyone catching up, such as someone in their fifties who now has spare income and a small pension.
The rules in plain English
You must have been a member of a registered pension scheme in each earlier year. You do not need to have contributed: HMRC's Pensions Tax Manual confirms that a member with no pension input that year, for example someone with only deferred benefits, can carry forward the whole allowance. But if you were not a member of any registered scheme at any point in a year, nothing can be carried forward from it. The State Pension does not count.
This year's allowance is used first. Only once the full current-year allowance is used do you draw on earlier years, starting with the oldest of the three.
Each year's unused amount is measured against that year's own allowance. The allowance was £60,000 in 2023/24, 2024/25 and 2025/26. If the taper or the MPAA applied to you in a year, the lower figure is the one that counts.
Total pension inputs are what count. Your own contributions, your employer's contributions and, in a defined benefit scheme, the growth in your benefits all use up the allowance.
| Tax year | Allowance | Unused allowance usable until |
|---|---|---|
| 2023/24 | £60,000 | 5 April 2027 |
| 2024/25 | £60,000 | 5 April 2028 |
| 2025/26 | £60,000 | 5 April 2029 |
| 2026/27 (current) | £60,000 | 5 April 2030 |
Worked example: a company director
A director pays herself a salary of £12,570 and takes the rest as dividends. Her company paid £10,000, £15,000 and £20,000 into her pension over the last three years. Her unused allowance is £50,000, £45,000 and £40,000: £135,000, plus this year's £60,000, so £195,000 in total.
The company has a strong year and pays £150,000 into her pension before 5 April 2027:
| Allowance used | Amount | Left afterwards |
|---|---|---|
| 2026/27 allowance | £60,000 | £0 |
| 2023/24 unused | £50,000 | £0 (would have expired anyway) |
| 2024/25 unused | £40,000 | £5,000 |
| 2025/26 unused | £0 | £40,000 |
There is no annual allowance charge, and she still has £45,000 of headroom. Had the company paid £200,000, the £5,000 above her £195,000 limit would face an annual allowance charge, about £2,000 at her 40% marginal rate.
For the company, an employer contribution is normally a deductible expense. Profits between £50,000 and £250,000 attract corporation tax at an effective marginal rate above 25% because of marginal relief, and the main rate is 25% above £250,000, so the contribution can save a significant amount of corporation tax as well as avoiding income tax and NI on the extracted cash. Our Dividend vs Salary Calculator compares the other ways of taking money out.
The earnings limit: personal versus employer contributions
This is the rule people miss most often.
Personal contributions only get tax relief up to 100% of your relevant UK earnings for the year, or £3,600 gross if higher (the £3,600 applies only in a relief at source scheme). Relevant UK earnings, listed in PTM044100, are things like salary, bonuses, taxable benefits and trading profits. Pensions are explicitly excluded, and dividends, rental profit and capital gains are not on the list.
So the director above, with a salary of £12,570, can only get relief on £12,570 of personal contributions, however much carry forward she has. If she paid in £50,000 personally, £37,430 would get no tax relief at all.
Employer contributions are not limited by your earnings. They are limited only by the annual allowance (including carry forward) and, for the company's corporation tax deduction, by HMRC's wholly and exclusively test.
This is also why carry forward needs planning before you sell a business. The sale proceeds are a capital gain, not earnings, so they do not let you make large personal contributions. If you want to use carry forward, the realistic route is usually an employer contribution from the company before the sale.
The wholly and exclusively test
HMRC's Business Income Manual at BIM46035 says an employer contribution to a registered scheme is an allowable expense unless there is a non-trade purpose. For a director-shareholder, HMRC looks at the whole remuneration package, salary plus pension, and asks whether it is excessive for the work done. Packages comparable with what unconnected employees doing similar work would receive should be accepted.
In practice, a large contribution for a full-time director running a profitable company is usually fine. Contributions for a family member who does little work for the business are where challenges arise. Two further points:
- Corporation tax relief is given in the accounting period in which the contribution is paid, not when it is accrued, under Finance Act 2004, section 196.
- Where contributions jump sharply from one year to the next, the deduction may have to be spread over future periods under section 197. Speak to your accountant before a very large one-off payment.
Worked example: a bonus earner
An employee earns £90,000 and receives a £60,000 bonus this year, so £150,000 of relevant UK earnings. His employer paid £8,000 a year into his pension over the last three years, leaving £52,000 unused in each.
He makes a £100,000 gross personal contribution under relief at source, alongside his employer's £8,000 this year. The total of £108,000 uses this year's £60,000 and £48,000 of his 2023/24 unused allowance. The remaining £4,000 from 2023/24 lapses on 5 April 2027, and £104,000 from the two later years is still available.
He pays £80,000 and the provider adds £20,000. His adjusted net income falls from £150,000 to £50,000, restoring his full Personal Allowance and extending his basic-rate band. In total his income tax falls by £46,217: £20,000 added by the provider and £26,217 claimed through Self-Assessment. The £100,000 contribution costs him £53,783.
If his employer offers bonus sacrifice, sacrificing the bonus instead would also save NI. Our bonus tax guide covers that.
The taper and the MPAA
Tapered annual allowance. If your threshold income is over £200,000 and your adjusted income is over £260,000, your allowance falls by £1 for every £2 above £260,000, to a minimum of £10,000. Someone with threshold income of £280,000 and adjusted income of £300,000 has a 2026/27 allowance of £40,000. Carry forward still works on top: a £60,000 contribution would use the £40,000 and £20,000 from 2023/24. Remember employer contributions are added back into adjusted income, so they cannot be used to dodge the taper.
Money purchase annual allowance. Once you have flexibly accessed a defined contribution pension, for example by taking income from flexi-access drawdown or an uncrystallised lump sum, your money purchase contributions are limited to £10,000 a year and carry forward cannot be added to the MPAA. Someone who has triggered it and pays in £30,000 faces a charge on £20,000, around £8,000 at 40%, however much unused allowance they had before.
Practical steps and evidence to keep
- Gather your pension input for each of the last three years, from every scheme. Schemes must send a pension savings statement by 6 October after the tax year if your inputs to that scheme exceed the standard allowance. Otherwise ask each provider for the figure.
- For defined benefit schemes, ask for the pension input amount; it is not the same as what you paid in.
- Check the taper and the MPAA for each year, including the current one.
- Check your relevant UK earnings if the contribution will be personal.
- Pay before 5 April 2027. The contribution must reach the scheme in the tax year. Allow time for the provider's processing, especially in March.
- Keep a record of your carry forward calculation, the statements and the payment dates. HMRC can ask for it, and you will need it for the following years.
- Report it on your Self-Assessment return if you need to claim higher-rate relief or report a charge.
Frequently asked questions
Do I need to tell HMRC I am using carry forward? There is no separate claim. If you exceed the allowance even after carry forward, you report the charge on your Self-Assessment return. If you are within it, keep your workings.
Can I carry forward if I was not working in an earlier year? Yes, if you were a member of a registered pension scheme during that year. Earnings are only relevant to tax relief on personal contributions in the current year.
Is carry forward still worth it if pensions become subject to inheritance tax? From 6 April 2027 most unused pension funds are due to be included in your estate for inheritance tax. That affects how pensions are passed on, not the income tax relief going in. See our inheritance tax guide.
Could the rules change? The Autumn Budget on 28 October 2026 could change pension tax rules; check before making a large contribution.
The bottom line
Carry forward lets you pay up to £240,000 into a pension this year if you were a scheme member and paid nothing in the previous three years, and much more than £60,000 for most people with modest recent contributions. Personal contributions are capped by your earnings, so directors and business sellers usually need an employer contribution. The 2023/24 allowance expires on 5 April 2027.
Work out your own figures in the Pension Carry Forward Calculator.
Related calculators and guides
- Pension Carry Forward Calculator, your unused allowance and expiry dates
- Pension Calculator, project what extra contributions could grow to
- Salary Sacrifice Calculator, the take-home cost of contributions through payroll
- Dividend vs Salary Calculator, for company directors
- Bonus Tax Calculator, the tax on a bonus and a bonus sacrifice
- How much do you need to retire?
- The £100,000 tax trap
This article is for general guidance only and is not personalised tax advice. Tax rules are complex and your circumstances may differ. For advice tailored to your situation, speak to a qualified accountant or tax adviser. Figures are for the 2026/27 tax year and sourced from gov.uk.
Sources
Rates and rules in this article are taken from the official pages below. Figures were checked against these sources at the last review date shown above; always confirm against the source before acting.
- GOV.UK: Tax on your private pension, annual allowance
- GOV.UK: Work out your tapered annual allowance
- HMRC: Pensions Tax Manual, carry forward (PTM055100)
- HMRC: Pensions Tax Manual, relevant UK earnings (PTM044100)
- HMRC: Pensions Tax Manual, information to members (PTM051700)
- HMRC: Business Income Manual, employer pension contributions (BIM46035)
- GOV.UK: Corporation Tax rates
- legislation.gov.uk: Finance Act 2004, sections 196 and 197
About the author
Alexandre Bernier, LLM (UK), CFP®, CIM®, PFP®. Financial planner with 18 years in banking and wealth management, holding a UK master of laws and the Canadian CFP®, CIM® and PFP® designations. Writes and reviews every calculator and article on FinanceToolz.
Rates and thresholds in this article are taken from HMRC and GOV.UK. See our editorial policy for how content is sourced, reviewed and corrected. This is general information, not regulated financial advice.