Carry forward — a worked example for high earners.
How to stack three years of unused annual allowance into a single large pension contribution in 2025/26, the order of use, the earnings constraint, and the tax saving of up to £108,000 at additional-rate.
- ▸In 2025/26, if all three prior years were fully unused, the maximum pension contribution is £220,000 (£60,000 current year + £60,000 from 2024/25 + £60,000 from 2023/24 + £40,000 from 2022/23).
- ▸The current year's £60,000 allowance is always used first, then carry forward is applied oldest year first.
- ▸Earnings must cover the total personal contribution — carry forward does not override the earnings cap, and employer contributions are not subject to it.
The setup: three years of substantial unused allowance
Carry forward is most valuable to high earners in years with a large taxable event — a business sale, a substantial bonus, a profitable self-employment year — where a large one-off pension contribution can be sheltered from tax at 45% or 40%.
The carry forward calculator works through these numbers automatically, but the logic is worth understanding in full so the inputs and outputs are interpretable.
The three years available for carry forward into 2025/26 are:
- 2022/23 — annual allowance was £40,000 (the allowance was £40,000 until April 2023)
- 2023/24 — annual allowance was £60,000
- 2024/25 — annual allowance was £60,000
If pension inputs in all three years were zero — no contributions, but membership of a registered scheme in each year — the available carry forward is:
- From 2022/23: £40,000
- From 2023/24: £60,000
- From 2024/25: £60,000
Total carry forward: £160,000
Current year 2025/26 allowance: £60,000
Combined ceiling: £220,000 in a single tax year.
This is the maximum possible in 2025/26 where 2022/23 had the lower £40,000 allowance. In subsequent years, once 2022/23 drops out of the three-year window and is replaced by 2025/26 (£60,000), the theoretical maximum rises to £240,000.
The calculation: current year allowance plus carried forward amounts
Consider a self-employed professional whose income varied significantly over the past four years:
| Year | Pension input | Annual allowance | Unused allowance |
|---|---|---|---|
| 2022/23 | £5,000 | £40,000 | £35,000 |
| 2023/24 | £8,000 | £60,000 | £52,000 |
| 2024/25 | £12,000 | £60,000 | £48,000 |
| 2025/26 | — | £60,000 | — |
Total carry forward available: £35,000 + £52,000 + £48,000 = £135,000
Combined 2025/26 ceiling: £60,000 + £135,000 = £195,000
If this individual earned £200,000 in 2025/26 — from a business disposal, a large contract, or a bonus — they could contribute up to £195,000 to a pension in that tax year without triggering any annual allowance charge. Their earnings of £200,000 comfortably cover the total contribution.
The tax saving at 45%
An additional-rate taxpayer contributing £195,000 gross to a pension saves income tax on that amount at 45%. The tax saving calculation:
£195,000 × 45% = £87,750 of income tax saved.
If contributions of the maximum £220,000 were made (fully unused prior years, earnings to match), the saving at 45% is:
£220,000 × 45% = £99,000 of income tax saved.
On a £240,000 contribution (the future theoretical maximum once the £40,000 year drops out), the saving would be:
£240,000 × 45% = £108,000 of income tax saved.
These figures represent the immediate tax relief. They exclude the long-term compounding benefit of sheltering a large sum inside a pension wrapper, which typically adds substantially more over a 10-20 year horizon.
For a 40% taxpayer, the same £195,000 contribution saves £78,000 in income tax. The relief is available through the pension provider (basic-rate relief added automatically via relief at source, with higher-rate and additional-rate relief claimed via Self Assessment) or through reduced salary if using salary sacrifice.
The earnings cap: the key constraint
Carry forward creates headroom against the annual allowance. It does not override the earnings limit.
The total pension contribution in a year — personal contributions plus employer contributions — must not exceed the individual's UK earnings in that year. "UK earnings" means employment income, self-employment income, and certain other earned income. Dividends, rental income, and interest do not count as earnings for this purpose.
The earnings cap applies to personal contributions only (not to employer contributions made by an employer on the individual's behalf). But most high earners making large one-off contributions are contributing personally, so the earnings cap is a live constraint.
A self-employed individual earning £150,000 in 2025/26 who has £195,000 of carry forward headroom available cannot contribute £195,000. Their personal contribution is capped at £150,000 (their earnings for the year). If an employer is also contributing on their behalf, the employer contribution does not reduce their personal cap, but both count toward the annual allowance.
Order of use: current year first, then oldest year first
The order in which allowances are consumed matters for record-keeping even if it does not change the immediate tax outcome:
- The current year's £60,000 annual allowance is always used first.
- Then the oldest year's carry forward is used (2022/23 before 2023/24 before 2024/25).
This order is set by HMRC rules, not by the individual. Carry forward from older years expires if not used — once 2022/23 falls outside the three-year window (from 6 April 2026 onward), any remaining unused allowance from that year is gone permanently.
This means a contribution in 2025/26 that uses £75,000 of the combined allowance (£60,000 current year + £15,000 carry forward) would consume the 2022/23 carry forward first, leaving more recent carry forward intact for future years. If only £35,000 of 2022/23 carry forward was available, it would be used in full, with £15,000 − £35,000 = the arithmetic resolved against the 2023/24 pot.
The annual allowance checker tracks the order of use across years and shows which carry forward buckets remain after a given contribution scenario.
This is factual information, not financial advice. If you're unsure what's right for your situation, speak to an FCA-regulated financial adviser.