Pension carry forward calculator — methodology

The calculation, in order

1. This year’s allowance, tapered only if both income measures exceed their limits.
2. Each of the three preceding years, at its own allowance, less what went in.
3. Total capacity is the four added together.
4. The contribution is set against this year first, then the carried years oldest first.
5. Anything beyond all four attracts an annual allowance charge.
6. Separately: relief on the member’s own contributions is capped at the greater of relevant UK earnings and the basic amount.

unused(year)   = max(0, allowance(year) − paid in(year))
carried        = unused(y−3) + unused(y−2) + unused(y−1)
capacity       = allowance(this year) + carried

used from:       this year → y−3 → y−2 → y−1        ← the statutory order
charge on:       max(0, contribution − capacity)

relief limit   = max(relevant UK earnings, basic amount)   ← unaffected by carried

There is no tax arithmetic anywhere in this page. Every allowance comes from an engine, and the only operations performed are the subtractions above.

Why four years of rules, and why the earlier ones are not selectable

The annual allowance is a per-year figure and carry forward compares three of them. The source repository therefore keeps a small table of the allowance for years it does not otherwise model — and keeps only that figure: no rates, no thresholds, no personal allowance. Those years cannot be computed in, and are deliberately absent from the tax year selector for that reason.

The allowance for the four years this calculation reads when contributing in 2026/27:

Two limits that are not the same limit

This is the distinction a carry-forward page most needs to make, and it is the one most of them do not.

• The annual allowance caps tax-privileged saving. Above it, the contribution is still relieved in full and then charged back — the excess is added to taxable income and taxed at the member’s marginal rate. Carry forward extends this limit; that is what carry forward is.
• The relief limit caps relief on the member’s own contributions at the greater of relevant UK earnings and the basic amount. Above it, there is simply no relief on the excess. Carry forward does not move it at all.

On the figures the calculator opens with, the two disagree loudly: capacity of £195,000.00 against a relief limit of £80,000.00. A page showing only the first would tell that reader they can relieve more than twice what they actually can.

Relevant UK earnings are narrower than the income figure most pages use. A pension already in payment, the state pension, rental income and taxable benefits are all taxed on the earned schedule and none of them are relevant earnings — so a retired member with a large pension income has relevant earnings of nil and a relief limit of £3,600. That is why the field is asked for explicitly and never defaulted from anything else on the page.

The taper, and the two ways a page can report it wrongly

The annual allowance is reduced for members with high income, by £1 for every £2 of adjusted income above £260,000, down to a floor of £10,000. Two things about it are easy to get wrong, and the engine’s own documentation names both:

• Both income measures must exceed their limits, not either. Testing adjusted income alone penalises a member with a modest salary and a generous employer contribution — which is a very ordinary shape for somebody using carry forward.
• The reduction is rounded down to a whole pound, so a member a pound over both limits is in the taper branch with nothing taken away. A page that printed “your allowance was tapered” from the flag alone would say so while the allowance was untouched. This one reads the amount actually lost and says nothing when it is nil.

The taper is applied to the current year only. Applying it to the three earlier years would need three more pairs of statutory income figures, and guessing them would be worse than the stated limitation.

Rates, thresholds and allowances

Sources

• gov.uk — Check if you have unused annual allowances on your pension savingsThe membership condition, the three-year window, and the order in which unused allowance is used. The page this calculator is a computation of.
• gov.uk — Tax on your private pension contributions: annual allowanceThe allowance itself, what counts towards it — including employer contributions and salary sacrifice — and the charge that arises above it.
• gov.uk — Tax on your private pension contributions: tax reliefThe separate limit on relief: the greater of relevant UK earnings and the basic amount. Cited because carry forward does not move it and readers assume it does.
• gov.uk — Pension schemes rates and allowancesThe annual allowance for each year, including the earlier years this calculation reaches back into and which are not otherwise modelled here.
• gov.uk — Work out your reduced (tapered) annual allowanceThat the taper applies only where BOTH threshold income and adjusted income exceed their limits, and the statutory definitions of each.

Five things this calculation does not model, stated here rather than buried

• Scheme membership in the earlier years. Carry forward is available only from a year in which the member belonged to a registered pension scheme — membership, not contributions. It is a fact about the reader’s history, no input could establish it, and it is the condition that most often makes a correct figure the wrong answer.
• The taper in the three earlier years. The standard allowance is used for each, which over-states carried capacity for a member who was tapered.
• The money purchase annual allowance. Flexibly accessing a defined contribution pension replaces the annual allowance with a much lower flat cap for money purchase savings, and carry forward cannot be used against it. A member who has triggered it faces two limits at once — the money purchase cap and a separate alternative annual allowance on defined benefit accrual — and the engine returns one flat figure, so neither this page nor the engine can describe that member correctly.
• The annual allowance charge. The excess is reported; the tax on it is the member’s marginal rate applied to it, and that needs an income breakdown and a region this page does not ask for. Scheme pays is not modelled either.
• What actually counted as a pension input in each year. For defined contribution schemes it is contributions plus relief plus employer contributions plus salary sacrifice; for defined benefit schemes it is a pension input amount derived from benefit growth, which only the scheme can supply. The boxes take a total and cannot check its basis.