Tax relief on pension contributions

What is tax relief?

Provided you’re a UK resident and under the age of 75, if you put money into a personal pension or SIPP you’ll be able to get a top-up from the government. It’s called ‘tax relief’ and is paid directly into your pension plan. Tax relief is given in this way at the basic rate of income tax, which is currently 20%.

How does tax relief work?

To get £100 into your pension, you pay £80 and the government top-up of £20 is paid straight into your plan. Tax relief is designed to give you back the tax you would have paid on the income you’ve earned, and which you’ve decided to put back into a pension. Even someone who doesn’t have any earnings can still claim tax relief on contributions of up to £2,880 per year, making a total annual contribution of £3,600. If you pay tax at a higher rate than 20%, the benefits don’t stop there. In this case, you’ll normally be entitled to claim a reduction in your tax bill for the year. You do this through your tax return (if you complete one) or by contacting your tax office.

Below are examples of how tax relief reduces the ‘real’ cost to you of making a pension contribution, per £100 contribution for a basic, higher and additional rate taxpayer.

Tax relief

Tax relief calculator

Calculate the tax relief you could receive on your annual personal pension contributions.

Income and Contributions