Hays - coffee mug with a notebook

Tax allowances

Personal Allowance

What is it? The Personal Allowance is the maximum amount of income you can earn in a tax year before paying tax.

How much is it? The standard Personal Allowance for the 2024/25 tax year is £12,570.

Annual Allowance (AA)

What is it? The AA is a limit to the total amount of contributions that can be paid into a defined contribution pension scheme and the total amount of benefits that you can build up in a defined benefit pension scheme in a single tax year, for tax relief purposes and without paying additional tax.

How much is it? The AA for the 2024/25 tax year is £60,000.

What if I’m a high earner? Since 6 April 2023, people with a taxable income over £260,000 will have their AA for that tax year restricted. This means that for every £2 of income you have over £260,000, your AA is reduced by £1, down to a minimum of £10,000. If your pension savings for the year are more than your AA, you’ll need to pay a tax charge.

Lifetime Allowance (LTA)

What is it? Up until 6 April 2023, there was the LTA to consider. This placed a limit on the overall value of pension benefits you could build up across all your pensions before having to pay additional tax. In April 2024, the LTA was abolished altogether.

To find out further information about the latest tax charges, visit the Government’s website.

There are also a number of other allowances that may apply to you. To read about these, or to find out more about the allowances above, please visit www.gov.uk/tax-on-your-private-pension