HMRC has confirmed an annual £60,000 rule for state pensioners. A pension saver reached out to the Labour Party government's tax arm over X, formerly Twitter, asking about a pension rule.
Query and Response
The saver asked: "If I retire at the end of April 2026 from full-time employment how much can I put into my private pension for tax year 26/27? If it is based on earnings for the year can I still use any unused allowance from previous years?"
On the social networking site, HMRC replied: "You will only have roughly one month of earnings for the 2026/27 tax year. You can personally contribute up to 100% of your relevant UK earnings for the 2026/27 tax year. This is further capped at the standard Annual Allowance, which is £60,000 for the 2026/27 tax year."
Understanding the Annual Allowance
Your annual allowance is the most you can save in your pension pots in a tax year (6 April to 5 April) before you have to pay tax. You will only pay tax if you go above the annual allowance. This is £60,000 this tax year.
Your annual allowance applies to all of your private pensions, if you have more than one. This includes the total amount paid into a defined contribution scheme in a tax year by you or anyone else (for example, your employer) or any increase in a defined benefit scheme in a tax year.
You might be able to carry over any annual allowance you did not use from the previous three tax years.
What to Do If You Exceed the Allowance
You will receive a statement from your pension provider telling you if you go above the annual allowance in their scheme. If you are in more than one pension scheme, ask each pension provider for statements. You can also use a calculator to work out how much you have gone above the allowance. If you go over your annual allowance, either you or your pension provider must pay the tax. Fill in the 'Pension savings tax charges' section of a Self Assessment tax return to tell HMRC about the tax, even if your pension provider pays all or part of it. You will need form SA101 if you are using a paper form.
You can still claim tax relief for pension contributions on your Self Assessment tax return if you are above the annual allowance.
HMRC does not tax anyone for going over their annual allowance in a tax year if they retired and took all their pension pots because of serious ill health or if they died.
