If you've exceeded your pension Annual Allowance, you may need to pay an Annual Allowance tax charge to HMRC.
In some cases, you can ask your pension provider to pay this charge from your pension savings instead. This is called Scheme Pays.
Penfold only supports Mandatory Scheme Pays. We do not offer Voluntary Scheme Pays.
When can Penfold pay my tax charge?
We can usually process a Mandatory Scheme Pays request if:
Your total Annual Allowance tax charge is more than £2,000.
Your pension savings with Penfold exceeded the standard Annual Allowance for the relevant tax year. (Currently £60,000 for 2025/26)
You submit your request before the HMRC deadline. This is usually July 31st, in the year following the year in which the tax year to which the annual allowance charge relates ended. For example, for the 2024/25 tax year, the usual deadline is 31 July 2026.
Mandatory vs Voluntary Scheme Pays
With Mandatory Scheme Pays, pension providers must pay an eligible Annual Allowance tax charge from your pension savings if the legal conditions are met.
With Voluntary Scheme Pays, pension providers can choose to pay a tax charge even when those conditions are not met. For example, where the charge is £2,000 or less.
Penfold only accepts requests that qualify for Mandatory Scheme Pays.
What information do I need to provide?
To request Mandatory Scheme Pays, you'll need to contact us so that we can process your request, we will send you a form to sign and complete. It is helpful for you to have the below information ready for us to complete your request:
Your full name and address
Your National Insurance number
The tax year the charge relates to
The amount of Annual Allowance tax charge you want Penfold to pay
We will ask you to confirm that you’ve calculated the charge correctly and you understand that once the form is submitted, it cannot be withdrawn and that your pension benefits will be adjusted in order to pay the tax charge.
We may ask for additional information if needed.
How do I know if I have an Annual Allowance tax charge?
If your pension contributions exceed your Annual Allowance or MPAA, we will send you a Pension Savings Statement. This can help you work out whether you have an Annual Allowance tax charge.
Receiving a Pension Savings Statement does not necessarily mean you have a tax charge. For example, you may be able to use the unused Annual Allowance carried forward from previous tax years.
You are responsible for calculating any tax charge and reporting it through your Self Assessment tax return, even where Penfold pays some or all of the charge for you.
Example
James has calculated an Annual Allowance tax charge of £3,500 for the 2025/26 tax year. His pension input amount with Penfold for that tax year was more than the standard £60,000 Annual Allowance.
Because his total Annual Allowance tax charge is more than £2,000 and his pension input amount with Penfold exceeded the standard Annual Allowance, he may qualify for Mandatory Scheme Pays.
If James submits a valid request by the applicable deadline and meets the other requirements, Penfold can pay an eligible amount of his Annual Allowance tax charge directly to HMRC using money from his pension pot, subject to the maximum amount that can be paid under Mandatory Scheme Pays. James must have at least enough money in his pension pot to cover the charge amount being paid at the time he makes the request.
James must still report his Annual Allowance tax charge through Self Assessment. The amount Penfold pays to HMRC will be deducted from James’s pension pot, reducing the value of his pension benefits accordingly.