Pension Carry-Forward Calculator

What pension carry-forward actually is

Pension carry-forward is the rule that lets you use unused annual allowance from the previous three tax years on top of this year's allowance. For 2026/27 the standard annual allowance is £60,000, frozen at that level since Jeremy Hunt raised it from £40,000 in April 2023. Stack three previous unused years on top and the theoretical ceiling in a single year is up to £240,000 of relievable contributions.

This is the single most underused feature in the UK pension system. It exists specifically to help people with lumpy income: the self-employed, business owners taking dividends in chunks, contractors with feast-and-famine years, and anyone receiving a windfall like a bonus, an inheritance, or proceeds from selling a business. If your income arrives in irregular bursts, carry-forward is how you avoid being punished by the annual cap.

How to use carry-forward correctly

The rules are mechanical and unforgiving. Get them in this order:

1. Use this year's allowance first. You can only dip into prior-year unused allowance after the current year's £60,000 is fully consumed.
2. Then dip into the oldest year first. In 2026/27 that means 2023/24, then 2024/25, then 2025/26. Anything older than three years is lost forever.
3. You must have been a member of a UK registered pension scheme in each prior year you carry forward from. Membership alone is enough; you do not need to have actually contributed. Auto-enrolment covers most employees automatically, but the self-employed who never opened a SIPP can be caught out.
4. Tax relief is capped at 100% of your UK relevant earnings for the year. Earn £80,000 and the most you can put in with relief is £80,000, even if your allowance plus carry-forward says you could go higher. Employer contributions can push beyond the earnings cap without triggering the personal-relief problem, but still count against the allowance.

Worked example: a windfall year

A contractor has been paying £20,000/year into a SIPP for the last three tax years. The annual allowance has been £60,000 since April 2023, so around £40,000 of allowance has gone unused each year. In 2026/27 the contractor sells a stake in a side business and has £200,000 of UK relevant earnings.

• Current year allowance: £60,000
• Unused from 2025/26 (£60k allowance, £20k used): £40,000
• Unused from 2024/25 (£60k allowance, £20k used): £40,000
• Unused from 2023/24 (£60k allowance, £20k used): £40,000
• Total available room: £180,000

Relevant earnings of £200,000 are above £180,000, so the full £180,000 is contributable with tax relief. At a 40% marginal rate, that single contribution saves £72,000 in income tax. The rules really do allow you to wipe out most of a high-earnings year's tax bill in one move, but only if you have the headroom and the documentation to back it up. Run the numbers through the calculator above before sending the cheque.

The tapered annual allowance for high earners

If your adjusted income is above £260,000, the £60,000 allowance starts to taper down by £1 for every £2 of additional income, to a floor of £10,000 at £360,000+ of adjusted income. Adjusted income is taxable income plus any employer pension contributions, which is why high earners with generous employer matching can get blindsided by the taper without realising.

The taper is policy-by-paperwork: the rule deliberately makes upper-bracket relief harder to claim than it needs to be, by piling on a second "threshold income" test, a separate definition of "adjusted income", and an interaction with carry-forward that requires knowing what your tapered allowance was in each of the prior three years. Most workers affected by it end up paying an accountant to navigate, which is itself a regressive feature of how the rule is structured. Carry-forward still works for tapered years, but you can only carry forward what was actually available in those years after the taper, not the pre-taper £60,000.

The Money Purchase Annual Allowance trap

If you have already taken taxable income from a defined contribution pension through flexi-access drawdown or UFPLS, you trigger the Money Purchase Annual Allowance (MPAA). Your annual allowance for further DC pension contributions drops to £10,000 a year, and you cannot use carry-forward at all for DC pensions. Taking only the 25% tax-free cash does not trigger it; taking any of the taxable 75% does.

This is a one-way door. Once triggered, there is no path back to the £60,000 allowance. Anyone considering early drawdown to bridge to State Pension age, or to manage tax in a gap year, needs to model the MPAA hit carefully before pulling the trigger. The pension match calculator and any planning around contractor income via the IR35 calculator should both be reviewed together with the MPAA in mind if you are anywhere near drawdown age.

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