annual allowance taper calculator

What is the annual allowance taper?

The tapered annual allowance can reduce how much you can contribute to a UK pension tax-efficiently in a tax year. For higher earners, your normal annual allowance is reduced once both income tests are met:

• Threshold income exceeds the threshold limit; and
• Adjusted income exceeds the adjusted income limit.

If both tests are triggered, your annual allowance is reduced by £1 for every £2 of adjusted income above the adjusted limit, down to a minimum annual allowance.

How this calculator works

Step 1: Choose the rule set

The calculator includes major rule periods so you can model recent years accurately. For most current planning, use 2023/24 onward (annual allowance £60,000, adjusted limit £260,000).

Step 2: Enter both income figures

Your taper only applies when both income conditions are met. That matters because many people have adjusted income above the limit but still pass the threshold test and avoid tapering.

Step 3: Add pension input and carry forward

Include total pension input for the current year. Then add unused allowances from up to three prior years to estimate your full available headroom.

Step 4: Estimate charge if above allowance

If your pension input exceeds your available allowance, the excess may be taxed at your marginal rate as an annual allowance charge.

Important planning notes

• Carry forward can materially increase your allowance if prior years were underused.
• Defined benefit schemes use pension input growth, not just contributions paid in cash.
• MPAA rules are complex; this tool applies a simplified approach and may be conservative.
• Income definitions involve adjustments and can differ from headline salary.

Example (quick intuition)

Suppose current rules apply, threshold income is £230,000 and adjusted income is £320,000:

• Adjusted income exceeds £260,000 by £60,000
• Taper reduction = £60,000 / 2 = £30,000
• Annual allowance = £60,000 - £30,000 = £30,000

If you contributed £70,000 and had no carry forward, excess is £40,000 and a potential charge applies.

Who should use this calculator?

This is useful for consultants, business owners, senior employees, and anyone whose remuneration can vary with bonus, dividends, or employer pension contributions.

Final reminder

Tax and pension legislation changes over time and your exact position can depend on scheme type and personal circumstances. Use this as a first-pass estimate, then confirm with a qualified accountant or regulated financial adviser before making decisions.