You can usually claim tax relief on private pension contributions worth up to 100% of your annual earnings, subject to the overriding limits. Tax relief is paid on pension contributions at the highest rate of income tax paid.
This means that if you are:
- A basic rate taxpayer you get 20% pension tax relief
- A higher rate taxpayer you can claim 40% pension tax relief
- An additional rate taxpayer you can claim 45% pension tax relief
The first 20% of tax relief is usually automatically applied by your employer with no further action required if you are a basic-rate taxpayer. If you are a higher rate or additional rate taxpayer, you can claim back any further reliefs on your self-assessment tax return.
You can claim additional tax relief on your self-assessment tax return for money you place into a private pension amounting to:
- 20% up to the amount of any income you have paid 40% tax on; and
- 25% up to the amount of any income you have paid 45% tax on.
You can also call or write to HMRC to make a claim if you pay Income Tax at 40%.
These figures apply for those claiming tax relief in England, Wales or Northern Ireland. There are regional differences if you are based in Scotland.
There is an annual allowance for tax relief on pensions of £60,000. There is also a three year carry forward rule that allows you to carry forward any unused amount of your annual allowance from the last three tax years if you have made pension savings in those years.
The lifetime limit for tax relief on pension contributions was removed with effect from 6 April 2023 and has now been abolished.
