The rules around UK pensions changed substantially in 2024 when the Lifetime Allowance (LTA) was abolished. This guide covers what survived, what replaced it, and the key limits for 2025/26.
At a glance — 2025/26
Annual Allowance — the main cap
You can contribute up to £60,000 across all your pensions in one tax year and get tax relief on it (or up to 100% of your relevant UK earnings if lower). The contribution counts gross — including employer contributions, and grossed-up personal contributions for basic-rate relief.
Exceeding the AA doesn't block the contribution, but triggers an Annual Allowance charge at your marginal rate — effectively clawing back the relief. You report this via Self Assessment (or your scheme can pay it through Scheme Pays for larger charges).
The taper — for high earners
High-income individuals see the AA taper down: £1 reduction for every £2 of adjusted income above £260,000, to a floor of £10,000. "Adjusted income" broadly means all taxable income plus any pension contributions.
| Adjusted income | AA |
|---|---|
| ≤ £260,000 | £60,000 |
| £280,000 | £50,000 |
| £300,000 | £40,000 |
| £340,000 | £20,000 |
| ≥ £360,000 | £10,000 (floor) |
Carry-forward — using unused AA from prior years
You can carry forward unused AA from the 3 prior tax years. For 2025/26 that means 2022/23, 2023/24 and 2024/25 — up to £180,000 of headroom on top of this year's £60k (subject to your earnings in the current year).
Requirements: you must have been a member of a UK registered pension scheme in each of those years (even if no contributions were made), and fill the current year's AA first.
What replaced the Lifetime Allowance
From 6 April 2024, the LTA and its 25%/55% charges were abolished. Two new allowances now govern what you can take tax-free:
- Lump Sum Allowance (LSA): £268,275 — the max tax-free lump sum (the old 25% of £1,073,100)
- Lump Sum & Death Benefit Allowance (LSDBA): £1,073,100 — the max tax-free total across lump sums, including death benefits paid tax-free
Beyond these, you still take pension income taxed at your marginal rate — no standalone pension tax above the old LTA threshold.
When can you access a pension?
Minimum access age is 55 (rising to 57 from April 2028). From then, you can typically:
- Take 25% as a tax-free lump sum (up to the LSA)
- Buy an annuity (guaranteed income for life)
- Use flexi-access drawdown (leave invested, take income as needed)
- Take ad-hoc lump sums (25% of each tax-free, rest at marginal rate)
Pensions and Inheritance Tax from April 2027
This is the single biggest pension policy change since the 2015 pension freedoms. From 6 April 2027, most unused defined-contribution pension pots will fall inside your estate for Inheritance Tax purposes. Historically pensions sat outside the estate and were a clean way to pass wealth down — that window closes at 2027.
- Death before 75 — beneficiaries still draw with no income tax but 40% IHT may now apply first.
- Death after 75 — beneficiaries pay marginal-rate income tax on withdrawals AND IHT may apply to the pot. Stacked effective rates can exceed 60%.
- Planning shifts toward spending pensions first (instead of preserving them as bequest vehicles), and toward whole-of-life insurance in trust to cover the expected IHT bill.
Read the full treatment in our UK Inheritance Tax guide.