Carry forward: increase your annual allowance for pension savings

Carry forward lets you use unused annual allowance from the last three tax years. 

This means you might be able to save more into your pension this tax year and still qualify for tax relief – provided your income is higher (or equal to) the amount you want to pay into your pension.   

For example, if you want to pay £80,000 into your pension, you’ll need to earn at least £80,000 in this tax year. 

You can see what counts as UK relevant earningsOpens in a new window on GOV.UK. 

You can check if you have unused annual allowancesOpens in a new window on GOV.UK.

You can usually use carry forward if you:

• have used up your current annual allowance
• were a member of a registered pension scheme during each tax year you want to carry forward, not including the State Pension 
• have not triggered the money purchase annual allowance (MPAA) by taking taxable money flexibly from a defined contribution pension. 

The annual allowance is the maximum amount that can be saved into a pension before tax relief stops. 

If you go above your allowance, you’ll need to pay an annual allowance tax charge. This means you’ll pay Income Tax on the money paid into your pension above the limit.   

The standard annual allowance for the 2024/25 tax year is £60,000. It might also be: 

• between £10,000 and £59,999 if you earn over £200,000 and the tapered annual allowance applies, or 
• £10,000 if you’ve taken money from a defined contribution pension (apart from tax-free lump sums) and the money purchase annual allowance (MPAA) has been triggered. 

For defined contribution pensions, to qualify for tax relief: 

• your total contributions must be less than (or equal to) the amount you earn, and 
• all payments in, including any from you and your employer, must not be higher than your annual allowance – £60,000 for most. 

For defined benefit pensions, the annual allowance counts how much your pension has increased in value during a tax year, rather than how much was paid in. But your contributions still need to be less than (or equal to) the amount you earn. 

Our guide about the annual allowance for tax relief on pension savings explains how it all works in full.

If your pension savings for the current tax year are higher than your annual allowance (£60,000 for most, including contributions from you, your employer and tax relief), you usually have to pay an annual allowance tax charge.  

But if you can ‘carry forward’ unused annual allowance from the last three tax years, you could reduce or remove the tax charge. A tax year runs from 6 April to 5 April. 

Example: If you paid in £35,000 above the standard annual allowance of £60,000 this tax year, any unused allowance from three years ago could cover it instead.

If there’s not enough, you could carry forward unused allowance from two years ago.  

If you’re contributing to a defined contribution pension, you still can’t get tax relief on more than you earn.

So, if you paid in £75,000 of the £95,000 and your employer paid in the other £20,000, you would need to earn at least £75,000 in this tax year to qualify for carry forward.  

If you’re self-employed and choose not to make employer contributions, you’d need to earn at least £95,000 to qualify for carry forward.  

These examples also assume you’ve had the standard annual allowance for all tax years. If you earn over £200,000 in a tax year, you might have a tapered annual allowance between £10,000 and £59,999 to carry forward instead. 

If you can use carry forward to cover all your annual allowance tax charge, you don’t need to do anything more. If carry forward reduces your tax charge, you’ll still need to pay the rest. 

You can use the calculator on GOV.UK to check if you have an annual allowance tax chargeOpens in a new window

There are two ways to pay the annual allowance tax charge:  

1. Ask your pension provider to pay on your behalf. This is called ‘scheme pays’ and means your pension benefits will be reduced.
   
   But your provider doesn’t always have to do this, including if the tax charge is less than £2,000. See who must pay the pensions annual allowance tax chargeOpens in a new window on GOV.UK for the rules.  
2. Pay the tax charge yourself.  

Either way, you need to complete a Self Assessment tax returnOpens in a new window – this calculates how much you need to pay or tells HMRC your provider has already paid.

The carry forward rules can be particularly useful for boosting your retirement savings if: 

• you want to make large pension contributions 
• your earnings change each tax year – affecting how much you can benefit from tax relief each year.  

If you earn less one year than you want to pay in, consider spreading your payments across a number of tax years. 

If you run your own limited company, you can usually decide which payments into your pension are made as: 

• personal employee contributions from your salary 
• employer contributions from your company. 

For employee contributions to qualify for tax relief, they cannot be higher than your total earnings during the tax year. Dividends do not count as earnings.  

All employer and employee contributions must also be within your annual allowance, including any allowance you can carry forward. 

Employer contributions do not qualify for tax relief, but they can usually be deducted as a business expense to reduce the amount of corporation tax you need to pay.   

This is allowed as long as the employer pension contributions are ‘wholly and exclusively’ for business purposes, which typically means they’re a reasonable amount for the work being done. 

For example, consistent amounts are used for any staff doing similar jobs and pension contributions are not higher than annual profits.  

For more information on the wholly and exclusively test, see HMRC’s Business Income ManualOpens in a new window

It’s a good idea to speak to a financial adviser, as they can explain the rules and work out what’s best for your situation. 

If you think you might be affected by an annual allowance tax charge, consider getting advice from a regulated financial adviser. 

An adviser can help you understand: 

• how much your annual allowance is 
• what you can carry forward 
• how to reduce the tax you might need to pay 
• how to pay any tax charges. 

Our tool can help you find a retirement adviser or see our guide Choosing a regulated financial adviser for more information.