The SIPP allowance for the 2025/2026 tax year is £60,000. That is the most you can pay into all your pensions combined in one tax year and still get tax relief, and your personal contributions are separately capped at 100% of your UK earnings.1GOV.UK. Pension Schemes Rates On the way out, the tax-free cash you can take across your lifetime is capped at £268,275 under the Lump Sum Allowance. Go over either limit and a tax charge cancels the advantage, so the numbers below are worth knowing before you make a large contribution or start drawing your pot.
The £60,000 Annual Allowance
The Annual Allowance is the ceiling on what can go into your pensions in a tax year with tax relief attached. For 2025/2026 (6 April 2025 to 5 April 2026) it stands at £60,000, and it covers everything flowing into your pots: your own contributions, any employer contributions, and the basic-rate tax relief HMRC adds on top.2GOV.UK. Tax on Your Private Pension Contributions – Annual Allowance
It is a single allowance across every pension you hold. A SIPP alongside a workplace pension does not give you two allowances. Contributions to both count against the same £60,000, and exceeding it triggers an Annual Allowance charge that taxes the excess at your highest income tax rate.
Your Earnings Cap on Personal Contributions
Personal contributions are also capped at 100% of your relevant UK earnings for the year. Relevant earnings means employment or self-employment income. Dividends, rental income, and investment returns do not count.3GOV.UK. Tax on Your Private Pension Contributions – Tax Relief If you earn £45,000 from work, you can only get tax relief on £45,000 gross of personal contributions this year, even though the Annual Allowance would notionally allow £60,000. Employer contributions could still take the total up to £60,000.
There is one exception. Even with no earnings at all, you can pay in £2,880 net and the government tops it up to £3,600 gross with basic-rate tax relief.3GOV.UK. Tax on Your Private Pension Contributions – Tax Relief This is what makes SIPPs workable for non-earning spouses and children.
Carry Forward From Earlier Years
If you did not use your full allowance in the previous three tax years, you can carry the unused portion forward into this year. Two conditions apply. You must first use the whole of your current-year £60,000, and you must have been a member of a registered pension scheme in each of the years you draw from.4GOV.UK. Pensions Tax Manual – PTM055100 Annual Allowance: Carry Forward: General If you held no pension at all in a given year, there is nothing to carry forward from it.
Use the oldest unused allowance first. Say you want to contribute £100,000 in 2025/2026. The current year covers £60,000. If £20,000 was unused in 2022/2023, £10,000 in 2023/2024, and £15,000 in 2024/2025, you take £20,000 from the oldest year, then £10,000, then £10,000 from 2024/2025, and the whole £100,000 lands with no charge. Anything older than three years back is gone.
When the Allowance Shrinks
Two situations reduce your allowance below £60,000: starting to draw taxable pension income, and earning a high enough income to trigger the taper.
The £10,000 Money Purchase Annual Allowance
Once you take taxable income from a defined contribution pension like a SIPP, the Money Purchase Annual Allowance (MPAA) applies and cuts your future money purchase contribution limit to £10,000.5GOV.UK. Pensions Tax Manual – Annual Allowance: Money Purchase Annual Allowance: General It is permanent. There is no route back to the full £60,000 once it has been triggered.
Flexi-access drawdown of taxable income and an uncrystallised funds pension lump sum (UFPLS) both trigger it. Taking only your 25% tax-free cash without drawing any taxable income does not.1GOV.UK. Pension Schemes Rates That distinction catches people out, because taking even a small amount of taxable income from a drawdown pot locks in the £10,000 cap for good. Carry forward cannot lift the £10,000 MPAA on money purchase contributions.5GOV.UK. Pensions Tax Manual – Annual Allowance: Money Purchase Annual Allowance: General
The Tapered Allowance for High Earners
Two income tests decide whether the taper bites. Your threshold income (broadly, total taxable income minus your personal pension contributions) must exceed £200,000, and your adjusted income (which adds employer contributions back on top) must exceed £260,000.6GOV.UK. Work Out Your Reduced Tapered Annual Allowance Fall below the £200,000 threshold and the taper does not apply, whatever your adjusted income.
Where both tests are met, the Annual Allowance falls by £1 for every £2 of adjusted income above £260,000, down to a floor of £10,000, which is reached at £360,000 of adjusted income. Someone with adjusted income of £300,000 loses £20,000 of allowance (half of the £40,000 excess), leaving a tapered allowance of £40,000.
How Tax Relief Actually Reaches Your SIPP
SIPPs generally use relief at source. You pay in from money that has already been taxed, and your provider claims back 20% basic-rate relief from HMRC and adds it to your pot.3GOV.UK. Tax on Your Private Pension Contributions – Tax Relief Pay in £8,000 and the pot receives £10,000. The £10,000 gross figure is the one that counts against your Annual Allowance.
Higher-rate (40%) and additional-rate (45%) taxpayers only get the 20% automatically. The rest comes through your Self Assessment tax return.3GOV.UK. Tax on Your Private Pension Contributions – Tax Relief A 40% taxpayer paying in £10,000 gross gets £2,000 credited in the pot and claims another £2,000 through Self Assessment. Missing that claim is one of the most expensive routine mistakes SIPP holders make. Scottish taxpayers have different rates and bands, which changes the amount of extra relief available through Self Assessment.
The £268,275 Tax-Free Withdrawal Cap
The Lifetime Allowance was abolished on 6 April 2024 and replaced by two allowances that focus on the tax-free elements of your pension.7GOV.UK. Abolition of the Lifetime Allowance There is no longer a cap on the total value of your pension, but there is still a firm cap on tax-free withdrawals.
Lump Sum Allowance
The Lump Sum Allowance (LSA) is £268,275. That is the total tax-free cash you can take across all your pensions during your lifetime, and it equals 25% of the old £1,073,100 Lifetime Allowance.7GOV.UK. Abolition of the Lifetime Allowance It applies to the tax-free part of pension commencement lump sums (the familiar 25%) and to the tax-free portion of any UFPLS. Anything you take above the LSA is taxed at your marginal income tax rate.
Lump Sum and Death Benefit Allowance
The Lump Sum and Death Benefit Allowance (LSDBA) is a broader cap of £1,073,100 for most people.8GOV.UK. Pensions Tax Manual – PTM174200 Transitional Rules for the Tax Year 2024-25: Lump Sum and Death Benefit Allowance It covers everything counted under the LSA plus tax-free lump sum death benefits paid to beneficiaries where you die before 75. Amounts above it are taxed at the beneficiary’s marginal rate.
If you used part of the old Lifetime Allowance before 6 April 2024, a transitional calculation reduces your LSA and LSDBA proportionally. Someone who had used 50% of the old allowance would have roughly £134,138 of LSA and £536,550 of LSDBA remaining. Holders of protections such as Fixed Protection 2016 may qualify for higher figures.
When You Can Take Money Out
The normal minimum pension age is 55, and taking anything from your SIPP before then generally attracts punitive tax charges. It rises to 57 on 6 April 2028, and this applies to all registered pension schemes including SIPPs.9GOV.UK. Increasing Normal Minimum Pension Age If you are between 55 and 57 now and have not yet touched your pension, that date matters for your timing.
How you take money out determines what your future allowance looks like. Take only the 25% tax-free cash (subject to the LSA), or buy an annuity, and the MPAA is not triggered; you keep the full £60,000 for future contributions. Draw taxable income through flexi-access drawdown or a UFPLS and you are locked into the £10,000 MPAA for money purchase contributions from then on.
Two Boundaries Worth Flagging
From 6 April 2027, most unused pension funds and pension death benefits will be included in your estate for inheritance tax, taxed at 40% above the nil-rate band.10GOV.UK. Inheritance Tax – Unused Pension Funds and Death Benefits Amounts passing to a spouse or civil partner, death-in-service benefits, dependants’ scheme pensions from defined benefit arrangements, and pension death benefits paid to a qualifying charity are outside the change.11GOV.UK. Technical Consultation – Inheritance Tax on Pensions – Liability, Reporting and Payment If you have been leaving a SIPP untouched partly as an inheritance vehicle, the maths shifts materially from April 2027 and is worth reviewing before then.
If you leave the UK, you can typically keep contributing to your SIPP with UK tax relief for up to five tax years after the tax year you became non-resident. Beyond the £3,600 gross non-earner allowance, you still need relevant UK earnings during that window to claim more.3GOV.UK. Tax on Your Private Pension Contributions – Tax Relief After that, you can still hold and manage the SIPP, but new contributions no longer attract UK tax relief.