The annual allowance caps tax-relieved pension contributions at £60,000 per tax year (or 100% of earnings if lower), counting your money, tax relief and employer contributions together. Unused allowance from the previous three years can be carried forward. Very high earners see it tapered, down to £10,000 once adjusted income is high enough, and anyone who has flexibly accessed a pension drops to the £10,000 MPAA.
Contributions above the allowance trigger a tax charge that claws the relief back. For most people the practical question is the opposite: unused allowance plus 40% relief and employer NI savings via salary sacrifice make pensions the most tax-efficient savings vehicle available. Check headroom with the Pension Calculator.
Someone earning £90,000 who contributes £20,000 while their employer adds £10,000 has used £30,000 of the £60,000 allowance, with three years of unused allowance still available to carry forward. At 40% relief, their £20,000 gross contribution reduced take-home pay by only £12,000, and via salary sacrifice the NI saving improves it further.
