The annual allowance is the maximum you can contribute to pensions each year with tax relief. Here's what you need to know.
The current annual allowance
For most people, the annual allowance is the lower of:
£60,000 per tax year, or
100% of your UK earnings
What counts toward your allowance
Your annual allowance includes all pension contributions:
Personal contributions (including to Chest)
Employer contributions
Contributions to any other pension schemes
Tax relief is included in the contribution amount for this calculation. So if you contribute £80 and receive £20 tax relief, £100 counts toward your allowance.
Non-earners
If you have no earnings (or very low earnings), you can still contribute up to £3,600 gross (£2,880 net plus tax relief) per year.
What happens if you exceed the allowance?
If your total pension contributions exceed your annual allowance, you'll have to pay an Annual Allowance Charge on the excess. This is calculated at your marginal rate of income tax and must be reported on your self-assessment tax return.
Carry forward
If you didn't use your full allowance in the previous three tax years, you may be able to carry it forward. This lets you make a larger contribution this year. See our article on carry forward for details.
Transfers don't count
If you transfer a pension from another provider into Chest, this does not count toward your annual allowance. You're simply moving existing savings, not making a new contribution.
Still need help?
If you have questions about the annual allowance, contact us at hello@joinchest.com. For specific tax advice, we recommend speaking to a tax adviser.