For the 2026/27 UK tax year, an individual has threshold income of £210,000 and adjusted income of £280,000. Under HMRC's tapered annual allowance rules for pension contributions, what is their annual allowance for the year?
- £60,000, because the taper only applies once income exceeds £280,000, so this individual is unaffected
- £10,000, the statutory minimum, because both threshold income and adjusted income exceed £200,000
- £50,000, because adjusted income exceeds the £260,000 threshold by £20,000, and the standard £60,000 allowance is reduced by £1 for every £2 of that excess, cutting it by £10,000
- The full £60,000, because although adjusted income exceeds £260,000, the taper only applies once threshold income itself exceeds £260,000, and this individual's threshold income is only £210,000
Why C? And why not the others?
Correct answer: C. £50,000, because adjusted income exceeds the £260,000 threshold by £20,000, and the standard £60,000 allowance is reduced by £1 for every £2 of that excess, cutting it by £10,000
The tapered annual allowance applies where threshold income exceeds £200,000 AND adjusted income exceeds £260,000; here threshold income of £210,000 clears the £200,000 gateway and adjusted income of £280,000 clears the £260,000 gateway, so the taper applies. The standard £60,000 annual allowance is then reduced by £1 for every £2 that adjusted income exceeds £260,000: the £20,000 excess produces a £10,000 reduction, leaving an annual allowance of £50,000, down to a statutory floor of £10,000 if the reduction would otherwise go further. The option treating £280,000 as the trigger point is wrong because the taper's adjusted income gateway is £260,000, not £280,000. The option assuming the minimum £10,000 applies is wrong because the taper only reduces the allowance by £10,000 in this case, well above the £10,000 floor, not down to it. The option requiring threshold income itself to exceed £260,000 is wrong because the two gateways use different figures: threshold income only needs to exceed £200,000, while it is adjusted income that must exceed £260,000 for the taper to bite.
Source: GOV.UK: Tax on your private pension contributions — annual allowance and tapered annual allowance