Annual Allowance Charge Calculator
Frequently Asked Questions
What is the pension annual allowance for 2024/25?
The standard annual allowance is £60,000 for 2024/25. This covers all pension contributions including employer contributions and any defined benefit pension accrual (calculated as 16× the increase in annual pension). If your threshold income exceeds £200,000 (adjusted income above £260,000) the allowance is tapered down to a minimum of £10,000. The money purchase annual allowance (MPAA) of £10,000 applies if you have flexibly accessed your pension.
How is the annual allowance charge calculated?
The annual allowance charge equals the amount by which your pension input exceeds your available annual allowance (including any carry forward from the previous three tax years), multiplied by your marginal income tax rate. It is added to your other income and taxed accordingly—it is not a fixed-rate charge. The charge is declared on your Self Assessment tax return.
What is pension carry forward?
Carry forward allows you to use unused annual allowance from the previous three tax years. You must have been a member of a registered pension scheme in those years. The oldest year's allowance is used first. For 2024/25 you can carry forward unused allowance from 2021/22, 2022/23, and 2023/24 (each year's standard allowance was £60,000 in 2023/24 and £40,000 in 2021/22 and 2022/23).
When can I use Scheme Pays to settle the annual allowance charge?
Mandatory Scheme Pays applies when the annual allowance charge exceeds £2,000 AND the excess pension input in a single scheme also exceeds £2,000. You can ask your pension scheme to pay the charge on your behalf; in return the scheme reduces your pension entitlement. The charge must be notified to the scheme before 31 July following the tax year.
What triggers the money purchase annual allowance (MPAA)?
The MPAA of £10,000 is triggered when you flexibly access your pension—for example, by taking income via flexi-access drawdown or a partial UFPLS. Once triggered it applies for life and limits new defined contribution contributions to £10,000 per year (though you can still accrue defined benefit pension up to the full annual allowance).