What is the annual allowance?
Updated 25 March 2019
The annual allowance is the maximum amount of pension savings an individual can have each year that benefit from tax relief. In practice, an individual is subject to a tax charge (the annual allowance charge) where their pension savings exceed their available annual allowance for a tax year.
There is nothing to stop an individual paying in more than their available annual allowance. An annual allowance charge would be payable on the excess and they would still be able to claim tax relief on all their personal and third party contributions up to the higher of 100% of an individual’s relevant UK earnings or £3,600 per annum. The annual allowance tax charge will probably cancel out most (if not all) tax relief if you exceed your annual allowance.
The current annual allowance limit is £40,000 (2019/20).
Unused annual allowance from the previous three tax years can be used in the current tax year once the current tax year's annual allowance has been used up. This is known as Carry Forward.
The value of any tax relief depends on your individual circumstances. This information is based on our understanding of current, taxation law and HMRC practice, which may change.