Last updated: 16 October 2026
Why plan now?
Pensions remain one of the most tax-efficient ways to save for retirement. Contributions attract tax relief at your highest rate, the fund grows free of income tax and capital gains tax, and you can usually take 25% tax free. The rules have changed a lot since 2023, so it is worth checking your plan against the 2026/27 limits.
Key pension limits for 2026/27
| Allowance | 2026/27 |
| Annual allowance | £60,000, or 100% of relevant earnings if lower |
| Tapered annual allowance | Reduces for adjusted income over £260,000, to a minimum of £10,000 |
| Money purchase annual allowance (after flexible access) | £10,000 |
| Lump sum allowance (tax-free cash) | £268,275 |
| Lump sum and death benefit allowance | £1,073,100 |
| Full new state pension | £241.30 a week |
The lifetime allowance was abolished from 6 April 2024 and replaced by the lump sum allowances above.
Carry forward unused allowance
If you were a member of a registered pension scheme in earlier years, you can carry forward unused annual allowance from the previous three tax years. You must use the current year’s allowance first. For 2026/27, that means unused allowance from 2023/24, 2024/25 and 2025/26 can be used, which can allow a single contribution well over £60,000 for someone with high earnings or a business sale.
Tax relief on contributions
Personal contributions get basic rate relief at source: you pay £80 and the scheme claims £20. Higher and additional rate taxpayers claim the extra relief through Self Assessment. Personal contributions are limited to 100% of your relevant UK earnings, or £3,600 gross if you have no earnings.
Company contributions for directors
If you run a limited company, employer pension contributions are usually deductible for corporation tax and avoid National Insurance. They are not limited by your salary, but must be justifiable as part of your overall pay package.
Worked example
Priya, a company director, takes a salary of £12,570 and dividends. Her company pays an employer contribution of £40,000. At a 25% corporation tax rate, this saves the company £10,000 of tax, and there is no income tax or NIC on the contribution. Had she taken the same amount as dividends, she would have paid dividend tax at 35.75% on much of it.
Changes coming
- State pension age is rising from 66 to 67 between 2026 and 2028.
- The minimum age to access private pensions rises from 55 to 57 from 6 April 2028.
- From 6 April 2027 most unused pension funds and death benefits are due to be included in your estate for inheritance tax.
- From April 2029 the NIC advantage of salary sacrifice is due to be capped at £2,000 a year.
Check your state pension
Get a state pension forecast on gov.uk and check your NIC record. Gaps can often be filled with voluntary contributions, which may be good value.
Frequently asked questions
Can I contribute if I have already started drawing my pension?
Yes, but if you have flexibly accessed it, the money purchase annual allowance of £10,000 applies.
Is pension income taxable?
Yes, apart from the tax-free lump sum, it is taxed as income.
Should I wait until April 2027 to change my plans?
Review your will and nominations now so you are ready for the IHT change.
Can my company pay into my spouse’s pension?
Only if they work for the company and the total package is reasonable.
Related: lump sum pension contributions before retirement, paying tax on the state pension and inherited pensions and inheritance tax.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with retirement and pension planning. See our Self Assessment tax return service service, or contact us for a free, no-obligation quote.
This page is general guidance based on HMRC rules for the 2026/27 tax year, checked against gov.uk on 16 October 2026. It is not personal advice, so speak to an accountant about your own situation.
