Pension Carry Forward: Using 3 Years of Unused Allowance in One Go

Pension carry forward lets you use annual allowance you did not use in the three previous tax years, on top of the current year's £60,000 allowance. Because the annual allowance has been £60,000 since 2023/24, someone who has made no pension savings at all could in theory put £240,000 into a pension in 2026/27 — although two separate caps (your earnings, and the tapered allowance for high earners) usually bite first.

• Three years back, oldest first. In 2026/27 you can reach back to 2023/24, 2024/25 and 2025/26.
• You must have been a pension scheme member in each year you carry forward from — but you need not have paid anything in.
• Personal contributions are still capped at 100% of your relevant UK earnings for the year. Carry forward does not lift that ceiling; employer contributions are not restricted by your earnings.
• The taper cuts each year's allowance separately. If your adjusted income exceeded £260,000 in an earlier year, the allowance you can carry forward from it is smaller.
• No claim or election is needed if the contribution fits inside your available allowance. You only report figures to HMRC if a charge arises.

How carry forward works

The annual allowance is the most that can go into your pensions in a tax year without a tax charge. It counts everything: your own contributions, the basic-rate tax relief added by the provider, employer contributions, and the value of any defined benefit build-up. That total is your pension input amount.

For 2026/27 the standard annual allowance is £60,000. If your pension input amount for a year is less than your allowance for that year, the difference is unused allowance. Carry forward simply means adding the unused amounts from the three previous tax years to this year's allowance before testing whether you have gone over.

Because the allowance rose to £60,000 on 6 April 2023, every year now inside the three-year window carries the same headline figure:

So the theoretical maximum for 2026/27 is £240,000. Unused allowance is not banked indefinitely: once a year falls outside the three-year window it is gone, which is why carry forward tends to be used in the year a bonus lands, a business has a profitable year, or a property or company is sold.

For the mechanics of pension input periods and how the allowance itself is measured, see the guide to the pension annual allowance for 2026/27.

Who qualifies

Three conditions have to be met.

1. Scheme membership in the earlier years

You must have been a member of a UK registered pension scheme at some point in each tax year you want to carry forward from. Membership is enough — a dormant workplace pot from an old job counts, and a year with £0 of contributions still generates £60,000 of unused allowance. What does not work is a year in which you had no pension at all; that year produces nothing to carry forward.

2. Enough relevant UK earnings (for personal contributions)

Tax relief on your own contributions is limited to the higher of £3,600 gross and 100% of your relevant UK earnings in the tax year you pay them. Relevant UK earnings means employment income, bonuses, taxable benefits and self-employment profits. It does not include dividends, rental profits, pension income or investment income.

This is the single biggest practical block for company directors. A director on a £12,570 salary taking the rest as dividends can personally contribute only £12,570 gross, no matter how much carry forward is sitting there. Employer contributions are not capped by earnings — they are tested only against the annual allowance (plus carry forward) and need to be allowable as a business expense under the wholly and exclusively rule. That is why large carry-forward contributions from owner-managed companies are almost always paid by the company.

3. You have not triggered the money purchase annual allowance

If you have flexibly accessed a defined contribution pension — typically by taking taxable income from drawdown or an uncrystallised lump sum — the money purchase annual allowance of £10,000 applies to further money purchase savings. Carry forward cannot be used to increase the £10,000. Unused allowance from earlier years can still be set against defined benefit accrual under the alternative annual allowance rules, but for most people who have triggered the MPAA, carry forward into a personal pension is off the table.

Order the years are used

The order is fixed and you cannot choose it:

1. The current tax year's allowance in full.
2. Then unused allowance from the earliest of the three carry-forward years.
3. Then the next earliest, and so on.

Using the oldest year first is helpful, because that is the year about to expire. Here is how the running total looks for someone whose pension input amounts have been modest:

Total available in 2026/27: £60,000 + £50,000 + £50,000 + £60,000 = £220,000.

The taper and carry forward

For high earners the annual allowance is tapered. Two income measures matter:

• Threshold income — broadly your taxable income less gross personal pension contributions that received relief at source. If threshold income is £200,000 or less, there is no taper at all, whatever your adjusted income.
• Adjusted income — broadly your taxable income plus employer pension contributions and defined benefit accrual. Above £260,000, the allowance falls by £1 for every £2 of excess, down to a floor of £10,000 at adjusted income of £360,000.

The key point for carry forward is that each year is tested on its own figures. If your adjusted income was £320,000 in 2024/25, your allowance for that year was £60,000 − (£60,000 ÷ 2) = £30,000, so at most £30,000 can come forward from it. A consistently high earner may find the real carry-forward pot is a fraction of £180,000.

Two further wrinkles catch people out. First, a large employer contribution made this year increases your adjusted income for this year, which can taper the current year's allowance even as you use carry forward. Second, a large personal contribution reduces threshold income, which can take you back under £200,000 and restore the full £60,000 for the current year — that is arithmetic worth modelling before deciding an amount. Salary sacrifice arrangements entered into after 8 July 2015 are added back when working out threshold income.

Relief is given at your marginal rate, so the value of a contribution differs by region. In England, Wales and Northern Ireland the top marginal rates are 40% and 45%. In Scotland, where Scottish rates apply to non-savings income, the higher, advanced and top rates are 42%, 45% and 48%, so the relief on the same contribution is worth more.

Worked example: a £150,000 contribution

Priya owns a trading company. In 2026/27 she takes a £50,000 salary plus dividends, and the company expects profits of £450,000 before any pension contribution. Her pension inputs have been small: £10,000 in 2023/24, £10,000 in 2024/25 and nothing in 2025/26. Her adjusted income stays below £260,000, so no taper applies.

Step 1 — total allowance available. Current year £60,000, plus unused of £50,000 (2023/24), £50,000 (2024/25) and £60,000 (2025/26) = £220,000.

Step 2 — who pays. Priya's relevant UK earnings are £50,000, so a personal contribution is capped at £50,000 gross — dividends do not count. A £150,000 contribution therefore has to come from the company as an employer contribution.

Step 3 — apply the £150,000 in order.

• 2026/27 allowance: £60,000 used, £0 left.
• 2023/24 unused: £50,000 used, £0 left. Running total £110,000.
• 2024/25 unused: £40,000 of the £50,000 used. Running total £150,000.

No annual allowance charge arises, because £150,000 is comfortably inside £220,000.

Step 4 — what is left for next year. £10,000 remains from 2024/25 and £60,000 from 2025/26 — both still inside the window in 2027/28 — giving £70,000 of carry forward plus the 2027/28 allowance. The unused £60,000 from 2023/24 was fully used, so nothing expires wasted.

Step 5 — the company's tax position. Profits fall from £450,000 to £300,000. Both figures sit above the £250,000 upper limit, so the contribution is relieved at the 25% main rate of Corporation Tax: £150,000 × 25% = £37,500 saved. The net cost to the company is £112,500, and there is no employer National Insurance on employer pension contributions.

Contrast that with a director whose adjusted income for 2026/27 reaches £340,000 once the employer contribution is counted. The current year's allowance becomes £60,000 − ((£340,000 − £260,000) ÷ 2) = £20,000, so the same £150,000 contribution would lean far more heavily on the earlier years — and could tip into an annual allowance charge at the marginal rate if the earlier years were tapered too.

Checking your figures and reporting

You do not tell HMRC that you are using carry forward. There is no election, no box to tick and no advance approval; it happens automatically when the contribution is tested against your allowances. What matters is being able to prove the earlier years' pension input amounts if HMRC asks, so ask each scheme for a pension savings statement. Schemes must issue one automatically if your input to that scheme exceeded £60,000 in a year.

If the contribution does exceed the allowance plus carry forward, the excess is added to your taxable income and taxed at your marginal rate, reported on the pension savings tax charges section of a Self Assessment return. Where the charge is large, a scheme can sometimes pay it from your pension instead — mandatory scheme pays applies where the charge exceeds £2,000 and your input to that scheme exceeded the standard annual allowance, with a notification deadline of 31 July following the tax year.

One forward-looking point for anyone planning contributions through salary sacrifice: changes to the National Insurance treatment of sacrificed pension contributions have been announced for the end of the decade, so long-run plans built on NI savings alone should be revisited.

What to do next

Work out the number before you commit to a contribution. The pension annual allowance calculator lets you enter each year's pension input and income to see how much carry forward you actually have once the taper is applied, and the pension contribution decision tool shows what a given contribution does to your tax bill, your allowance and your take-home pay. If you want the underlying rules in more detail first, start with the annual allowance guide, then use HMRC's own check for unused annual allowances service to sanity-check the earlier years.