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Taper and carry forward together: the order of operations
Taper sets this year’s allowance; carry forward tops it up; prior-year unused is measured against each prior year’s own (possibly tapered) allowance. Worked end to end.
Based on HMRC’s Pensions Tax Manual (PTM055100, PTM055200, PTM057100) and Finance Act 2004.
6 min read · Last reviewed
— In short
The taper is applied first and carry forward second. This year's tapered allowance is fixed by the income tests, then unused allowance from the three prior years is stacked on top of it; carry forward never restores a tapered allowance. Each prior year's unused amount is measured against that year's own, possibly tapered, allowance, and consumption runs current-year allowance first, then earlier years oldest first.
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For a high earner the annual allowance resolves in two steps, and the order is fixed. First, fix this year's allowance. If threshold income exceeds £200,000 and adjusted income exceeds £260,000, the £60,000 standard allowance tapers by £1 for every £2 of adjusted income over the limit, to a floor of £10,000. Then ask how much unused allowance from the three prior years can top it up. Taper first, carry forward second — the taper sets the base the carry forward stacks on, and carry forward never restores a tapered allowance.
Worked end to end
2026/27: adjusted income £300,000, threshold income £230,000, a £60,000 employer contribution (the whole PIA). Unused allowance on file: £10,000 from 2024/25 and £15,000 from 2025/26; 2023/24 fully used.
- Taper reduction ((£300,000 − £260,000) ÷ 2)
- £20,000
- Tapered annual allowance
- £40,000
- Carry forward available (£10,000 + £15,000)
- £25,000
- Total allowance
- £65,000
- Pension input amount
- £60,000
- Chargeable excess
- £0
Consumption runs current-year allowance first, then prior years oldest first: £40,000 against 2026/27, then the £10,000 from 2024/25 in full, then £10,000 of the £15,000 from 2025/26 — leaving £5,000 of 2025/26 unused and still alive for next year. The ordering matters beyond tidiness: oldest-first keeps the youngest unused allowance intact, and that's the only part that survives into the following year's three-year window.
PTM057100 (taper) · PTM055100 (carry forward, consumption order) — figures engine-computed against the 2026/27 config
The common errors
The expensive one is measuring prior-yearunused allowance against the £60,000 standard figure when the member was tapered in those years too. A £300,000 earner was almost certainly tapered in 2024/25 and 2025/26 as well — their unused allowance is whatever was left of each year's tapered allowance, often £0, not £60,000-minus-contributions. Computing carry forward off the standard allowance overstates headroom and walks the client into a charge. Two smaller traps. Threshold income is the gate: at or below £200,000 no taper applies at any adjusted income, so salary exchange that drops TI below the line switches the taper off entirely. And carry forward requires registered-scheme membership in the prior year, not contributions.
The tapered annual allowance calculator and the carry forward calculator run the two halves of this computation on the same engine, with each prior year taken at its own year's config.
Prior-year taper: PTM055200 — unused allowance is computed against the alternative (tapered) AA where it applied
Sources & grounding
Worked figures (tapered AA £40,000 on AI £300,000/TI £230,000; CF available £25,000 from 2024-25 £10,000 + 2025-26 £15,000; total allowance £65,000; PIA £60,000 → excess £0; consumption current-year £40,000 → 2024-25 £10,000 → 2025-26 £10,000, leaving £5,000 of 2025-26): computed through the production engine (calculatePensionAA, scripts/ground-phase-c.mts, 2026-06-10).
Taper parameters 2026/27 (threshold income £200,000, adjusted income £260,000, £1-for-£2 reduction, £10,000 floor): the versioned 2026-27 config; PTM057100.
Primary sources:PTM057100
Carry-forward rules (three prior years, current-year AA first then oldest-first; membership requirement; prior-year unused measured against that year’s OWN tapered AA): PTM055100; engine Theme-B prior-year taper handling.
Primary sources:PTM055100
For planning and illustration purposes only. Verify all inputs against source documents. This explainer does not constitute financial or tax advice.
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