Pension annual allowance

The taper only applies if both income tests are failed. Threshold income over the limit and adjusted income over its own, higher one. Either alone leaves the allowance untouched.

⚠ Threshold income is the one that lets you out

gov.uk is explicit: your allowance is not reduced if your threshold income is at or below the limit, no matter what your adjusted income is. Someone with adjusted income of £300,000 keeps the full allowance if their threshold income comes in under. A calculator that tapers on adjusted income alone gets that person badly wrong — and they are exactly the person who came looking.

The two figures move in opposite directions

They are not one income counted twice. Threshold income takes pension contributions out. Adjusted income puts them all in, including your employer's. So paying more into a pension can pull you back under the threshold gate while doing nothing at all for the adjusted one.

⚠ Salary sacrifice is added back

Salary given up for pension provision under an arrangement made after 8 July 2015 is added back into threshold income. That rule exists precisely to stop sacrifice being used to duck the taper, and a calculator that ignores it will tell you sacrifice solves a problem it does not.

How the contributions are paid changes the answer

Net pay contributions come out before Income Tax, so they are already out of your income and get added back for the adjusted figure. Relief at source contributions are paid from taxed pay, so the gross amount comes off threshold income instead. Sacrificed salary was never your income at all — it becomes an employer contribution, and only the anti-avoidance rule brings it back.

The charge is not a rate

Anything above your available allowance is added to your taxable income and taxed at whatever rate it lands in. That is why the figure here comes from the Income Tax ladder rather than a percentage — for most people caught by the taper it will be at the additional rate, but not for everyone.

What this does not cover

The money purchase annual allowance, which replaces all of this at a much lower figure once you have flexibly accessed a pension — and which carry forward cannot top up. Defined benefit pension input amounts, which are a calculation on the growth in your promised pension rather than a contribution you can read off a payslip. Scheme pays, which lets the scheme settle the charge for you. The £2,880 that can be paid with no earnings at all. And the 100%-of-earnings limit on tax relief, which is a separate cap that can bite before the annual allowance does.

Where these figures come from

Every figure above is read from a dated rate file rather than written into the page, and each one is checked against the gov.uk page it came from. How these numbers are kept right sets out the whole process.

Salary sacrifice calculator