What is the Annual Allowance?
The Annual Allowance is the maximum amount your pension savings can grow in a tax year before an annual allowance tax charge may apply. NHS staff need to be especially careful because defined benefit pension growth is not simply the amount deducted from your payslip. Pay rises, awards, extra sessions, and scheme transitions can all increase the Pension Input Amount.
Standard allowance
For the 2026/27 tax year before tapering.
Taper starts
Adjusted income gate, usually after the threshold income gate is met.
Minimum tapered allowance
High earners can have much less headroom than the headline allowance.
Who should pay close attention?
Annual allowance issues often appear after a good career event: promotion, extra work, awards, or a catch-up in pension growth.
Consultant, GP, senior SAS, senior nursing, or leadership pay where pensionable pay is rising quickly.
Clinical Excellence Awards, extra programmed activities, waiting-list initiatives, overtime, or a large backdated pay award.
A promotion, new consultant post, return from leave, or jump from LTFT to full-time work during the tax year.
Mixed 1995/2008 and 2015 scheme membership, McCloud remedy statements, or split Pension Savings Statement figures.
Private practice, locum, partnership, or other pension saving outside the NHS scheme.
Income close to the taper gates, especially where salary sacrifice, employer contributions, or other taxable income changes the calculation.
McCloud and the transitional remedy
If you moved from the 1995 or 2008 legacy scheme to the 2015 scheme, you may be in scope for the McCloud/Sargeant remedy. For the remedy period (6 April 2015 to 31 March 2022), your pension entitlement is treated as if it remained in the legacy scheme. NHSBSA should issue revised Pension Savings Statements for affected years, and annual allowance calculations for those years may need to be revisited. If your employer or scheme has not yet issued a revised statement, contact them proactively before finalising any carry-forward or charge calculations.
The four-part annual allowance check
Estimate your Pension Input Amount
For NHS defined benefit schemes, the best starting point is the Pension Savings Statement. Contribution totals alone can understate the real pension growth because the HMRC method looks at the increase in pension benefits.
Check whether tapering applies
Tapering is not triggered by income alone. Your threshold income must usually exceed £200,000, and your adjusted income must exceed £260,000. If both gates are met, your allowance reduces by £1 for every £2 of adjusted income above the adjusted income threshold, down to £10,000.
Apply carry forward in the right order
You use the current year allowance first, then unused allowance from the previous three tax years. You generally need to have been a member of a registered pension scheme in the year you want to carry forward from.
Work out the charge and payment route
Any excess is taxed at your marginal rate. You may be able to pay personally through Self Assessment or use Scheme Pays, where the NHS pension scheme pays the charge and your future pension is reduced.
How the Pension Input Amount is calculated for NHS defined benefit schemes
For defined benefit pensions like the NHS scheme, the Pension Input Amount is not your payslip contribution deductions. HMRC measures the growth in the capital value of your pension rights during the tax year.
The formula
PIA = (16 × closing pension + closing lump sum) − (16 × opening pension × CPI factor + opening lump sum × CPI factor)
The opening figures are scaled up by the September CPI rate from the previous calendar year. In a high-inflation year this revaluation increases the opening value, which reduces the measured PIA — sometimes significantly. In years where your pay growth is close to inflation, the PIA can be near zero even if your pensionable pay is high.
1995 section
The automatic 3× lump sum is included in both opening and closing values. This can substantially raise the PIA even when the pension increase alone appears modest.
2008 and 2015 sections
No automatic lump sum. The PIA is driven by the pension increase only. The 2015 section uses career average revalued earnings, so the opening value includes any in-scheme revaluation applied during the year.
Multiple pension schemes
All pension saving counts: NHS pension, AVCs, and any private pension or SIPP. The PIA from every scheme is added together and tested against your annual allowance.
Documents and figures to gather
The calculator works best when these figures are ready. If you do not have everything, you can still start with a rough risk check and then refine the estimate later.
Requesting your Pension Savings Statement:NHS Pensions only issues a statement automatically where it estimates you may have breached the allowance. To get one proactively, request it through the NHS Pensions employer portal or contact your employer's pension administrator. Statements for the previous tax year are typically issued by 6 October following the year end. If you are in scope for the McCloud remedy, request a revised statement covering the remedy period separately.
Pension Savings Statement: opening and closing pension, lump sum where relevant, and scheme split if shown.
Recent payslips: pensionable pay, employee pension deductions, employer contributions where shown, and year-to-date figures.
P60 and tax return information: total taxable income, private practice income, partnership drawings, and other pension contributions.
Carry-forward history: unused allowance, previous PIA figures, and any years when you were fully opted out.
Scheme Pays history: previous annual allowance charges split between legacy and 2015 sections, plus election dates.
Employment changes: promotion letters, CEA awards, extra sessions, LTFT changes, maternity/parental leave, or backdated pay awards.
What our annual allowance calculator covers
The full calculator is available with an account. It is designed around the NHS-specific edge cases that generic pension tools often miss.
Standard annual allowance, tapered allowance, and the minimum tapered allowance.
Threshold income and adjusted income using the two-gate HMRC taper test.
Carry forward from the previous three tax years, including opted-out years where the full allowance may be unused.
Pension Input Amount from Pension Savings Statement figures, including 1995 automatic lump sum and 2015 scheme growth.
Split legacy and reformed scheme calculations for members with both 1995/2008 and 2015 sections.
LTFT and mid-year WTE changes by weighting weeks at different working patterns.
Payslip year-to-date extrapolation where you need a current-year pensionable pay estimate.
Scheme Pays availability, tax charge estimates, and the long-term impact of scheme-pays interest.
Watch-outs that change the answer
Threshold income and adjusted income: Salary sacrifice, employer pension contributions, private income, and other pension saving can change whether tapering applies.
Defined benefit growth: For NHS pensions, the HMRC calculation uses the growth in pension benefits. Your employee contributions are important, but they are not the whole PIA calculation.
1995 scheme lump sum: The automatic lump sum can matter when working out capital value changes for legacy scheme sections.
LTFT and mid-year WTE changes: A full-time equivalent salary can overstate or understate the position if you changed working pattern during the year.
If you may have a charge
Check whether carry forward reduces or removes the excess before assuming there is a tax bill. You can only use carry forward after using the current year allowance.
If a charge remains, compare paying personally through Self Assessment with Scheme Pays. Scheme Pays can avoid an immediate cash cost, but it permanently reduces your future NHS pension and may accrue interest.
Keep an eye on Scheme Pays deadlines and ask for professional advice where figures are large, tapering is involved, or you have multiple income sources.
Official guidance and related resources
GOV.UK tapered annual allowance
HMRC guidance on threshold income, adjusted income, and tapering.
GOV.UK carry forward checker
Official guidance on unused annual allowances.
HMRC Pensions Tax Manual: carry forward
Technical rules for applying previous-year allowances.
HMRC Pensions Tax Manual: Scheme Pays
Mandatory Scheme Pays rules and eligibility.
HMRC Scheme Pays deadlines
Deadline guidance for annual allowance charge elections.
Key annual allowance dates
Tax year ends
5 April
Pension Savings Statements issued automatically (where breach estimated)
By 6 October following the year end
Register for Self Assessment if not already registered
5 October following the year end
Self Assessment filing and payment deadline
31 January following the year end
Mandatory Scheme Pays election deadline
31 July in the year following the tax year the charge relates to (for 2025/26, 31 July 2027)
Scheme Pays deadlines can vary, including where a statement arrives late. Always verify against current HMRC guidance and the NHS Pensions scheme member guide.
Continue your planning journey
These related guides cover the next questions that usually come up after this topic.
Need a clearer annual allowance estimate?
NHS Financial Planner includes calculators for annual allowance, carry forward, tapering, Scheme Pays, pension projections, and tax planning. Create an account to run the figures, save results, and use your documents to refine the estimate.
This guide is for general education only. It is not financial, pension, tax, or investment advice.