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HMRC has provided clarity on how pensions work. It spoke after a question from a taxpayer about their private pensions.
The person contacted the tax authority over social media as they were thinking of retiring soon. They asked if they were to retire from full-time employment at the end of April 2026, how much could they put into their private pension for the 2026/2027 tax year.
They asked: “If it [is] based on earnings for the year can I still use any unused allowance from previous years?” HMRC responded to explain how the rules would apply to their situation.
The department explained: “You will only have roughly one month of earnings for the 2026/27 tax year. You can personally contribute up to 100 percent of your relevant UK earnings for the 2026/27 tax year.”
HMRC went on to mention another rule to note here: “This is further capped at the standard annual allowance, which is £60,000 for the 2026/27 tax year.” Under current rules, you can deposit up to £60,000 into your private pensions without paying tax each financial year.
Your allowance will be reduced if either your threshold income for the year is more than £200,000, or if your adjusted income is more than £260,000. More information about how the reduced allowance works is available on the Government website.
State pension rules
Another thing to bear in mind when planning for your retirement is your state pension entitlement. You can check how much you are on track to get on the gov.uk website.
You typically need 35 years of National Insurance contributions to get the full new state pension. This is currently worth £241.30 a week, or just under £12,550 a year.
Financial expert Martin Lewis recently shared some thoughts on when it’s worth paying to fill in any gaps in your National Insurance record. The state pension age is changing at the moment, moving up in stages from 66 to 67.
This process is taking place between April 2026 and April 2028. Legislation is also in place for this to go up again from 67 to 68, between April 2044 and April 2046.
