If you receive a windfall — a bonus, an inheritance, business sale proceeds, or a deferred-comp payout — and you want to push as much of it as possible into a pension, the £60,000 standard annual allowance can look like a hard ceiling. It isn’t. HMRC’s carry-forward rule lets you pull in unused annual allowance from up to three previous tax years on top of the current year’s allowance, often unlocking £150,000 or more of headroom in a single contribution.
But carry-forward isn’t a free pass. There are three eligibility tests that must hold simultaneously, a strict calculation order HMRC requires you to follow, and two traps — the tapered annual allowance and the Money Purchase Annual Allowance — that quietly reduce what you can actually use. This guide walks through the mechanics with worked examples for 2025-26.
The Standard Annual Allowance: £60,000
The annual allowance is the maximum total pension input — combining your own contributions, your employer’s contributions, and the tax relief HMRC adds on top — that can flow into your pensions in a single tax year while still receiving tax relief.
For 2025-26, the standard annual allowance is £60,000. This figure has applied since 6 April 2023, when it was raised from £40,000 in the Spring 2023 Budget. The three previous tax years carried these allowances:
| Tax year | Standard annual allowance |
|---|---|
| 2025-26 (current) | £60,000 |
| 2024-25 | £60,000 |
| 2023-24 | £60,000 |
| 2022-23 | £40,000 |
The annual allowance applies across all registered pension schemes you contribute to in a year — personal pensions, SIPPs, workplace defined contribution schemes, and the pension input amount on any defined benefit accrual.
What Carry-Forward Actually Does
The carry-forward rule, set out in section 228A of the Finance Act 2004, lets you contribute more than the current year’s annual allowance by using any unused allowance from the three immediately preceding tax years. It applies in strict order: you must use this year’s allowance first, then the earliest carry-forward year, working forward.
A few defining features:
- It’s automatic — you don’t have to apply or notify HMRC, but you must record the calculation on your Self Assessment return if it pushes your contributions above the standard AA.
- Carry-forward is rolling — once a year drops off the back of the three-year window, that unused allowance is gone forever.
- It applies to all pension input, not just personal contributions. Employer contributions count toward both your current and your carry-forward usage.
The Three Eligibility Tests
Before HMRC will let you use carry-forward, all three of the following must be true:
Test 1 — Pension scheme membership in each carry-forward year
You must have been a member of a UK-registered pension scheme during each of the tax years you want to carry forward from. Membership is the test — not contribution. A dormant SIPP with zero contributions still counts. A workplace pension you joined and then left counts. State Pension does not count as a registered scheme.
If you weren’t a member in (say) 2022-23 but were in 2023-24 and 2024-25, you can only carry forward from those two years.
Test 2 — The earnings cap on tax relief
Personal pension contributions get tax relief only up to 100% of your relevant UK earnings in the contribution year. Carry-forward does not override this cap. If you earn £80,000 in 2025-26, the most tax-relieved personal contribution you can make in 2025-26 is £80,000 — regardless of how much unused allowance is theoretically available.
Employer contributions are not bound by your personal earnings (they’re an employer expense), so they can exceed 100% of your salary. This is one reason carry-forward is often more useful for company directors paying employer contributions from retained profits than for employees paying from net salary.
Test 3 — The calculation order
HMRC requires a strict order of use:
- Current year’s annual allowance first — exhaust 2025-26’s £60,000 (or your tapered figure) before drawing on any carry-forward.
- Earliest carry-forward year next — then use unused allowance from 2022-23 first, then 2023-24, then 2024-25.
This ordering matters because the oldest year drops off the window next April. Forcing you to use it first prevents people deferring to “save” the older allowance.
Worked Example A — Building Up Unused Allowance
Setup: Priya is 38, salaried at £75,000, and contributes £15,000 (employer + employee combined) to her workplace pension in 2025-26.
- 2025-26 AA: £60,000
- Used: £15,000
- Unused, carried forward into 2026-27, 2027-28, 2028-29: £45,000
If Priya continues at the same rate, by April 2029 she’ll have £45,000 × 3 = £135,000 of unused allowance plus that year’s standard £60,000 — total £195,000 of headroom — available for, say, a business-sale lump sum. She just needs the cash and the earnings to support it.
Worked Example B — Using Carry-Forward
Setup: Marcus, a self-employed consultant aged 52, has a £150,000 trading profit year in 2025-26 (his earnings cap), receives a £100,000 deferred-comp payout, and wants to push the full £100,000 into his SIPP. His pension history:
| Tax year | AA | Contributed | Unused |
|---|---|---|---|
| 2022-23 | £40,000 | £25,000 | £15,000 |
| 2023-24 | £60,000 | £30,000 | £30,000 |
| 2024-25 | £60,000 | £20,000 | £40,000 |
| 2025-26 | £60,000 | £100,000 planned | — |
HMRC calculation order:
- 2025-26 AA first: £60,000 of the £100,000 contribution lands against 2025-26. Allowance remaining: £0. Contribution remaining to allocate: £40,000.
- 2022-23 (earliest CF year first): £15,000 unused. Eat £15,000. Remaining: £25,000.
- 2023-24 next: £30,000 unused. Eat £25,000 of it. Remaining: £0. Allocation complete.
Total tax-relieved contribution: £100,000, using £60,000 of 2025-26 AA plus £15,000 from 2022-23 plus £25,000 from 2023-24. He still has £5,000 of 2023-24 unused allowance and the full £40,000 from 2024-25 sitting in reserve.
Earnings cap check: £100,000 contribution ≤ £150,000 earnings. ✓ Passes test 2.
The Tapered Annual Allowance Trap
High earners face the tapered annual allowance. For 2025-26, the taper triggers when both of the following hold:
- Threshold income (broadly your taxable income excluding pension contributions) exceeds £200,000, AND
- Adjusted income (taxable income including all pension contributions, both yours and your employer’s) exceeds £260,000.
When both gates open, your annual allowance reduces by £1 for every £2 of adjusted income above £260,000, down to a floor of £10,000 (reached at £360,000 adjusted income).
How the taper interacts with carry-forward
Tapered years still count for carry-forward purposes — but at their tapered figure, not at £60,000. If your 2024-25 tapered AA was £30,000 and you contributed £20,000, you carry forward £10,000 — not the £40,000 you’d carry from a non-tapered £60,000 year.
Example: Sasha is a partner whose 2024-25 adjusted income was £300,000. Her 2024-25 tapered AA was £60,000 − ((£300,000 − £260,000) ÷ 2) = £40,000. She contributed £35,000 that year. She carries forward £5,000 from 2024-25, not £25,000.
Tapered-year carry-forward calculations need accurate adjusted-income and pension-input records for each historical year. If your accountant or pension provider doesn’t have these, request them before planning a large contribution.
The Money Purchase Annual Allowance Trap
If you have flexibly accessed a defined contribution pension — taking income drawdown, an UFPLS, or any taxable lump sum — your DC pension input is permanently capped by the Money Purchase Annual Allowance (MPAA), which is £10,000 for 2025-26.
Critically: carry-forward does not apply to the MPAA. The £10,000 is a hard ceiling on DC contributions for the rest of your life. You can still accrue benefits in a defined benefit scheme up to a separate “alternative annual allowance” (£60,000 − £10,000 = £50,000 in a normal year), but for SIPPs and workplace DC, £10,000 is the line.
Taking only the 25% tax-free lump sum, or using small-pots commutation on a pot under £10,000, does not trigger MPAA. Taking any taxable income from a DC pension does. Once triggered, it cannot be reversed.
If you’re considering both a flexible drawdown and a large carry-forward contribution, do the contribution first.
The Earnings Cap — Re-Stated
Carry-forward gives you more allowance, but it does not override the 100% earnings cap on tax-relieved personal contributions. If you earn £40,000 in 2025-26, the largest tax-relieved personal contribution you can make is £40,000 — full stop, regardless of how much carry-forward sits behind you.
This is why carry-forward is disproportionately useful for:
- Company directors who can route contributions as employer contributions from retained profits (not subject to the personal earnings cap).
- High earners in a bonus year whose earnings comfortably exceed the planned contribution.
- Self-employed individuals in a one-off high-profit year.
For PAYE employees on a steady salary, carry-forward usually unlocks 1-2 years of unused AA at most — useful but rarely transformative.
Practical Timing — The 5 April Deadline
To use 2025-26 annual allowance plus carry-forward from 2022-23, 2023-24, or 2024-25, the contribution must clear into your pension provider by 5 April 2026. Backdating is not possible — a contribution made on 6 April 2026 counts against 2026-27 and resets the carry-forward window (you lose 2022-23 forever).
Some providers take 5-10 working days to process bank transfers and allocate contributions, particularly around the tax year-end rush. If you’re planning a large 2025-26 contribution, aim to send funds by mid-March 2026 to give the provider time to process. SIPP transfers and in-specie contributions take longer still.
Use the Pension Tax Relief Calculator
Working out the right contribution size requires modelling your marginal income tax rate, any personal allowance restoration if your income is in the £100k–£125,140 band, and the effective relief rate on each pound. The pension tax relief calculator handles the income-tax-side of the maths; layer the carry-forward calculation above to size the gross contribution.
Related Reading
- Pension annual allowance 2025-26 — the £60,000 baseline this article builds on.
- Salary sacrifice pension: is it worth it? — how to combine sacrifice with carry-forward to save NI as well as income tax.
- UK pension tax relief explained — relief-at-source vs net-pay vs salary sacrifice mechanics.
- The £100k–£125,140 personal allowance trap — the 60% effective rate band where pension contributions earn double-relief by restoring the personal allowance.
FAQs
Can I use carry-forward without telling HMRC?
You don’t need to apply for carry-forward — it’s automatic. But if your total contribution exceeds the standard £60,000 AA, you should declare it on your Self Assessment tax return showing the carry-forward calculation, so HMRC can match it against the annual allowance check. If you face an annual allowance charge in a later review, you’ll need contemporaneous records of the previous three years’ contributions to defend the calculation.
What happens to carry-forward if I leave the UK?
If you become non-UK resident, you can still contribute to a UK pension and get tax relief on up to £3,600 a year (the basic-rate-relievable cap for non-earners), but you can’t use carry-forward against UK earnings you no longer have. If you return to UK residency within 5 years and were previously a scheme member, the historic AA accrual is still available for carry-forward subject to the three-year rolling window.
Does the MPAA cancel my entire annual allowance, or just for DC?
Just DC. If you’ve triggered MPAA, your money-purchase (DC) pension input is capped at £10,000 with no carry-forward. But you can still accrue defined-benefit pension up to a separate “alternative annual allowance” of £50,000 (£60k AA minus £10k MPAA), and that DB accrual can use carry-forward from earlier years’ unused alternative allowance. The MPAA only fences off the DC bucket.