If you haven’t used your full pension annual allowance in recent years, you may be able to carry forward unused allowance and make a much larger pension contribution now.
This can be particularly useful for limited company directors. Your company might have accumulated surplus cash, or you may have delayed making pension contributions while building the business.
For 2026/27, the standard pension annual allowance is £60,000. But carry forward can potentially allow you to contribute significantly more without facing an annual allowance tax charge.
What is pension carry forward?
Carry forward allows you to use unused pension annual allowance from the previous three tax years.
For the 2026/27 tax year, this means you may be able to use unused allowance from:
- 2023/24;
- 2024/25; and
- 2025/26.
This is in addition to your available annual allowance for 2026/27.
So, if you haven’t made large pension contributions in recent years, your available allowance could be considerably higher than £60,000.
You can check the official rules in HMRC’s pension annual allowance guidance.
How much can you carry forward?
You need to look at how much annual allowance you had available in each of the previous three tax years and how much pension saving you actually made.
The standard annual allowance was £60,000 in each of 2023/24, 2024/25 and 2025/26.
For example:
| Tax year | Annual allowance | Pension saving | Unused allowance |
|---|---|---|---|
| 2023/24 | £60,000 | £20,000 | £40,000 |
| 2024/25 | £60,000 | £30,000 | £30,000 |
| 2025/26 | £60,000 | £40,000 | £20,000 |
In this example, you have £90,000 of unused annual allowance from the previous three years.
Add the standard £60,000 annual allowance for 2026/27 and you could potentially have £150,000 of annual allowance available.
That doesn’t automatically mean you should contribute £150,000. Other pension and company tax rules still need to be considered.
Do you need to have paid into a pension in previous years?
No. You don’t need to have made pension contributions during a previous year to carry forward unused allowance from that year.
However, you must have been a member of a registered pension scheme at some point during the tax year you want to carry forward from.
This could include being an active, deferred or pensioner member of a registered pension scheme.
For example, if you had an old workplace pension but made no contributions to it during 2023/24, you may still be able to carry forward unused annual allowance from that year.
If you weren’t a member of a registered pension scheme at all during that tax year, you normally can’t carry forward its unused allowance.
Which year’s allowance do you use first?
There is a set order.
You use your current tax year’s annual allowance first.
If your pension saving exceeds that amount, you then use unused allowance from the previous three tax years, starting with the earliest year first.
For a contribution made in 2026/27, the normal order is therefore:
- 2026/27 current annual allowance;
- unused allowance from 2023/24;
- unused allowance from 2024/25; and
- unused allowance from 2025/26.
This matters because unused allowance disappears once it falls outside the three-year carry-forward period.
Can your limited company use your carry forward?
Carry forward belongs to you as the pension scheme member, rather than to your limited company.
However, your company can make an employer pension contribution that uses your available annual allowance and carried-forward allowance.
This is particularly useful for directors because employer pension contributions aren’t restricted by your relevant UK earnings in the same way as tax relief on personal pension contributions.
For example, taking a £12,570 salary doesn’t necessarily prevent your company from making a £60,000, £80,000 or larger employer pension contribution if you have sufficient annual allowance available.
Read our guide to company vs personal pension contributions for more on this distinction.
Does your salary limit carry forward?
Not where your limited company is making the contribution.
The relevant earnings restriction applies to tax relief on your own personal pension contributions. Employer contributions aren’t restricted by your salary in the same way.
This distinction is particularly important for company directors who take a relatively small salary and receive the rest of their income as dividends.
Dividends aren’t relevant UK earnings for personal pension tax relief.
So a director with a low salary may have limited scope for large tax-relieved personal contributions, while their company may be able to make a much larger employer contribution.
For more information, read our full guide to paying into a pension from your limited company.
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Does carry forward guarantee Corporation Tax relief?
No. These are two separate tests.
Carry forward determines how much pension saving you can potentially make without an annual allowance tax charge.
Whether your limited company receives Corporation Tax relief on an employer contribution is a separate question.
Employer pension contributions can normally be deducted when calculating company profits if they meet HMRC’s wholly and exclusively test.
For a director, HMRC considers the overall remuneration package and whether the payment has been made for the purposes of the company’s trade.
So having £100,000 of available pension allowance doesn’t automatically mean that a £100,000 company contribution will qualify for Corporation Tax relief.
You can read HMRC’s guidance on employer pension contributions in BIM46035.
What if the tapered annual allowance applies?
High earners can have an annual allowance below the standard £60,000.
For 2026/27, the tapered annual allowance can apply where both:
- threshold income exceeds £200,000; and
- adjusted income exceeds £260,000.
The annual allowance is reduced by £1 for every £2 of adjusted income above £260,000, subject to a minimum tapered annual allowance of £10,000.
If the taper applied to you in one of the previous three tax years, you need to calculate the unused allowance for that year using the annual allowance that actually applied to you, rather than simply assuming you had £60,000 available.
What if the MPAA applies?
The Money Purchase Annual Allowance (MPAA) can apply after you flexibly access taxable benefits from a defined contribution pension.
The MPAA is £10,000 for 2026/27.
This is particularly important for directors who have already started drawing from a pension but still want their company to make pension contributions.
You can’t use carry forward to increase the £10,000 MPAA for money purchase pension contributions.
The interaction between the MPAA, carry forward and any defined benefit pension savings can become more complicated, so take advice before making a large contribution if the MPAA applies to you.
Do personal and company contributions both count?
Yes.
Your annual allowance applies across your pension savings as a whole. It isn’t a separate £60,000 allowance for company contributions and another £60,000 for personal contributions.
Employer contributions, personal contributions and other pension input that counts towards the annual allowance all need to be taken into account.
If you have several pensions, you also need to consider the pension input across all of them.
Can you carry forward £180,000 plus this year’s £60,000?
Potentially, but only in the right circumstances.
Because the standard annual allowance has been £60,000 in each of the three previous tax years, someone who had made no pension contributions but remained a member of a registered pension scheme throughout those years could potentially have:
- 2026/27 annual allowance: £60,000;
- 2023/24 unused allowance: £60,000;
- 2024/25 unused allowance: £60,000; and
- 2025/26 unused allowance: £60,000.
That gives a potential total of £240,000 of available annual allowance in 2026/27.
However, this assumes the full standard annual allowance applied in each year, the MPAA doesn’t restrict the contribution, and the other carry-forward conditions are satisfied.
And again, having £240,000 of annual allowance doesn’t automatically mean a £240,000 employer contribution will qualify for Corporation Tax relief.
Do you need to claim carry forward?
You don’t normally need to make a separate claim to HMRC before using carry forward.
Unused annual allowance is carried forward automatically where the conditions are met.
However, you should keep records showing how you’ve calculated your available allowance, particularly if your company is making a large contribution.
You may need pension contribution or pension input figures from previous providers if you’ve had more than one pension.
HMRC has more information on checking unused annual allowance from previous years.
What happens if you exceed your available annual allowance?
If your pension savings exceed your available annual allowance after taking any carry forward into account, you may face an annual allowance tax charge.
The charge effectively adds the excess pension saving to your taxable income for the purpose of calculating the tax due.
Depending on the amount of the charge and the circumstances, it may sometimes be possible for your pension scheme to pay the charge under the Scheme Pays rules.
Don’t assume that your pension provider will automatically know about contributions made to other schemes or how much carry forward you have available.
Carry forward example for a limited company director
Suppose your company has built up cash and you want it to make a £100,000 employer pension contribution during 2026/27.
You have made the following pension contributions:
| Tax year | Annual allowance | Already used | Unused |
|---|---|---|---|
| 2023/24 | £60,000 | £30,000 | £30,000 |
| 2024/25 | £60,000 | £40,000 | £20,000 |
| 2025/26 | £60,000 | £50,000 | £10,000 |
You therefore have £60,000 of unused allowance available to carry forward.
Assuming the standard £60,000 allowance applies to you in 2026/27, you potentially have £120,000 of annual allowance available.
A £100,000 employer contribution would use:
- £60,000 of your 2026/27 annual allowance;
- all £30,000 of your unused 2023/24 allowance; and
- £10,000 of your unused 2024/25 allowance.
You would therefore have £10,000 unused from 2024/25 and £10,000 unused from 2025/26.
Should your company make a large pension contribution?
Carry forward can make it possible for a limited company to make a substantial pension contribution for a director, particularly where contributions have been relatively low in previous years.
But there are several separate questions to check:
- how much annual allowance you have available;
- whether the tapered annual allowance applies;
- whether you’ve triggered the MPAA;
- whether the company contribution qualifies for Corporation Tax relief;
- whether the company has enough cash after the contribution; and
- whether putting the money into a pension suits your personal retirement plans.
If you’re deciding whether to leave surplus company funds in the business, take them as dividends or put them into your pension, read our guide to pension contributions vs dividends.
You can also use our company pension contribution tax savings calculator to estimate the Corporation Tax effect of an employer contribution.
For a large contribution, ask your accountant to check the company tax position and consider taking regulated financial advice on the pension side.
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