The annual allowance is reduced on a tapered basis for high earners who meet both these criteria:
• Adjusted income is above the current threshold (currently £240,000). Adjusted income includes all pension contributions.
• Threshold income is above the current threshold (currently £200,000). Threshold income excludes pension contributions.
For every £2 above the adjusted income threshold, £1 is deducted from the basic £40,000 annual allowance. For example, if someone’s adjusted income is £15,000 above the threshold, their annual allowance would be reduced to £32,5000.