HMRC confirms £60,000 pension rule with tax-free Annual Allowance
HMRC has confirmed the £60,000 rule for pensions in the latest tax-free Annual Allowance.
HMRC has confirmed a rule for all pensioners which has been kept in place for the new tax year, which began in April.
A member of the public recently got in touch with HM Revenue and Customs to ask about how much they can put away in their private pension each year, with one eye on retirement.
What many may not realise is that private pension contributions are in fact capped, with a hard limit on how much you can put away in your pension each year.
Not to be confused with the state pension, which is the DWP benefit given to workers when they hit state pension age as long as they made enough National Insurance contributions, private pensions are those set up through work or individually.
The idea is that they give you additional spending money in retirement on top of the state pension. And unlike the state pension, you don’t have to wait until state pension age to start accessing the money - most private pension funds are accessible from age 55, so you can take early retirement.
A member of the public approached HMRC to ask about private pension limits. @whynotthis 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?”
HMRC’s Customer Service team, @HMRCCustomers via X, replied to confirm: “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.”
This means that the limit is 100% of your salary, or £60,000, whichever is lower. For example, if you earn £55,000 a year, you can only put £55,000 into your private pension. If you earn £70,000, you can only put £60,000 into it, as that is the standard Annual Allowance cap, without owing tax on it.
Gov.uk explains: “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’ll 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 in to a defined contribution scheme in a tax year by you or anyone else (for example, your employer)
any increase in a defined benefit scheme in a tax year.”
If you do go over the limit, you’ll be asked to pay tax on the excess by HMRC, usually through a self-assesment tax return.
