A Self‑Invested Personal Pension (SIPP) is a tax‑efficient way to save for retirement, offering flexibility and control over how your pension is invested. However, the government sets rules on how much you can contribute each tax year while still receiving tax relief. This article explains the key limits, when they apply, and what they mean for you.
What Is the SIPP Annual Allowance?
The annual allowance is the maximum you can contribute to all your pensions combined each tax year (including SIPPs and workplace pensions) while still benefiting from tax relief.
- For the 2025/26 tax year, the standard annual allowance is £60,000.
- You can receive tax relief on contributions up to 100% of your UK taxable earnings, or £3,600 if you have little or no income.
This limit includes all contributions:
✔ Your personal contributions
✔ Contributions from your employer
✔ Contributions made via salary sacrifice
If you exceed the annual allowance, you may have to pay an Annual Allowance Charge, which effectively removes the tax benefit on the excess.
Tapered Annual Allowance (High Earners)
If you are a high earner, your annual allowance may be reduced.
- Tapering applies if your adjusted income exceeds £260,000.
- For every £2 your adjusted income exceeds £260,000, your annual allowance reduces by £1.
- The minimum tapered allowance for 2025/26 is £10,000.
Adjusted income includes all taxable income plus all pension contributions (from you or your employer).
Money Purchase Annual Allowance (MPAA)
If you have started taking flexible withdrawals from your pension, the Money Purchase Annual Allowance may apply.
- For the 2025/26 tax year, the MPAA is £10,000.
Once triggered, the MPAA permanently replaces your standard annual allowance for defined contribution contributions (including SIPP payments). Read our article on What is the Money Purchase Annual Allowance for more details.
Can You Carry Forward Unused Allowances?
Yes — the carry forward rule allows you to use any unused annual allowance from the previous three tax years.
To use carry forward, you must:
- Have been a member of a UK‑registered pension scheme in those years
- Use up your full current‑year allowance first
This can be especially helpful if you receive a bonus or want to make a large lump‑sum contribution.
Contribution Limits for Those With No or Low Earnings
Even if you don’t have taxable earnings, you can still contribute up to £3,600 gross each tax year:
- You pay £2,880 net
- HMRC adds £720 in basic‑rate tax relief
This rule also applies to non‑earners, including stay‑at‑home parents and unemployed individuals.
Tax Relief on SIPP Contributions
SIPP contributions receive generous tax relief:
- Basic‑rate taxpayers (20%) – relief added automatically
- Higher‑ and additional‑rate taxpayers – claim extra relief through self‑assessment
For example:
- A £800 net contribution becomes £1,000 in your SIPP after basic‑rate relief.
- Higher earners can claim an additional 20%–25% via their tax return.
Lifetime Allowance Update (Context Only)
Although the traditional Lifetime Allowance (LTA) was abolished in the 2023/24 tax year, limits on tax‑free lump sums still apply:
- Standard tax‑free lump sum cap: £268,275 (2025/26)
These don’t affect how much you can contribute, but they determine how much of your pension you can take tax‑free.
When These Limits Apply
These rules apply for the 2025/26 tax year (6 April 2025 – 5 April 2026).
Contribution limits may change from one tax year to the next, so it’s important to review your pension planning regularly and check for updated guidance.
Key Takeaways
- Most people can contribute up to £60,000 into pensions (including SIPPs) each year.
- Tax relief is capped at 100% of earnings (or £3,600 for non‑earners).
- High earners may see their allowance reduced to as little as £10,000.
- MPAA of £10,000 applies after flexible access.
- Unused allowances can be carried forward for three years.
