Pension carry-forward in 2026-27: a three-year audit before you contribute
Photo: pension annual allowance paperwork calculator UK desk, via primior.com
Pension contributions are usually made with the current tax year in mind, but the annual allowance system permits a longer view. Where contributions in an earlier year fell short of the available allowance, the unused amount may be carried forward to a later year. For 2026-27, that lookback covers 2023-24, 2024-25 and 2025-26. The oldest of those years expires on 5 April 2027, so an audit before making a large contribution is not merely prudent; it is the difference between using an allowance and losing it.
The three-year window and why 2023-24 matters now
Carry-forward is not an extra allowance. It is permission to use unused annual allowance from the previous three tax years. For a contribution made in 2026-27, the relevant earlier years are 2023-24, 2024-25 and 2025-26. The unused amount from 2023-24 can only be used in a later year up to 2026-27. After 5 April 2027, it falls away.
That makes 2023-24 the first year to examine. If contributions to all pension arrangements in 2023-24 were below the annual allowance that applied to you, the shortfall may be available now. The same exercise then applies to 2024-25 and 2025-26, but those years have more time left on the clock. A sensible sequence is to confirm the oldest year first, then work forward.
How the calculation works in practice
The standard annual allowance is £60,000. Carry-forward allows a contribution in 2026-27 above that figure, provided the excess is covered by unused allowance from the earlier years and the contribution is within the individual's relevant UK earnings. Contributions include both employee and employer payments, so a company contribution reduces the amount of allowance available just as a personal contribution does.
For each earlier year, the unused amount is the annual allowance for that year minus the total contributions made in that year. If the result is positive, it may be carried forward. The order in which the years are used is not prescribed in the legislation, but using the oldest first is the usual practical approach because it addresses the allowance that expires soonest.
Tapered annual allowance: a moving target
For higher earners, the annual allowance may be less than £60,000. The tapered annual allowance reduces the standard amount where threshold income exceeds £200,000 and adjusted income exceeds £260,000. The allowance falls by £1 for every £2 of adjusted income above £260,000, down to a minimum of £10,000.
This means the unused amount for each carry-forward year must be calculated using the tapered allowance that applied in that year, not a flat £60,000. Income can fluctuate, particularly for the self-employed, company directors and those with bonus or dividend income. A year of lower income may have produced a larger unused allowance; a year of higher income may have produced little or none. Records of threshold and adjusted income calculations are therefore part of the audit, not an afterthought.
Records that support the claim
Carry-forward is claimed through the tax return where relevant, but the underlying evidence sits outside it. Pension statements showing contributions for each year are the starting point. P60s, self assessment returns and employer contribution records help to confirm the figures. Where tapered allowance applies, a schedule showing how threshold and adjusted income were calculated for each year is useful.
A simple carry-forward schedule can record, for each of 2023-24, 2024-25 and 2025-26: the annual allowance that applied, the total contributions paid, the unused amount and the evidence held. That schedule should be kept with the 2026-27 records. If HMRC later asks how a large contribution was covered, the answer should be a matter of documented arithmetic rather than recollection.
Timing questions before a large contribution
Several practical points should be settled before a contribution is made. First, confirm that relevant UK earnings are at least equal to any personal contribution on which relief is claimed. Carry-forward does not increase the earnings limit. Second, check whether the money purchase annual allowance applies because of flexible access to a pension in a previous year. Third, confirm that the pension provider can accept the contribution and has the information needed to process it.
If an employer is making the contribution, the timing and salary sacrifice arrangements should be checked. If the contribution is large, the interaction with the annual allowance charge should be modelled in advance. The aim is to use carry-forward to avoid a charge, not to create one by exceeding the available amount.
A measured approach
The final months of a tax year often prompt hurried decisions, but carry-forward rewards a calmer process. Confirm the figures for 2023-24 first, then 2024-25 and 2025-26. Check the tapered allowance position for each year rather than assuming the standard figure. Keep a clear schedule of unused amounts and the evidence behind them. And remember that the 2023-24 allowance must be used by 5 April 2027 if it is to be used at all.
A large pension contribution can be a sensible use of surplus income, but only where the allowance position is understood. An audit before contributing turns a vague sense of unused allowance into a documented figure, which is the basis on which carry-forward is safely used.
