Overview
- HMRC figures for the 2024/25 tax year show 30,440 people reported breaching the annual allowance, a 22% rise from the prior year, and the value of excess contributions climbed to £672 million, up 33%.
- The tapered annual allowance cuts permitted tax-free pension saving for high earners once threshold income passes £200,000 and adjusted income passes £260,000 and can reduce allowances to as little as £10,000.
- Employer pension contributions and pension growth in defined-benefit schemes count towards the annual allowance, which many savers do not realise and which can suddenly push someone into the taper.
- HMRC does not send real-time alerts about breaches and relies on Self Assessment, so people often discover over-contributions two to three years later when reversing payments is usually impossible and tax charges are backdated.
- Campaigners and former ministers say frozen tax thresholds have increased tax on pension income and this spike in breaches is likely to sharpen calls for clearer warnings or policy change, while advisers urge savers to check all contributions and consider carry-forward rules.