Pensions guide
Pension tax relief explained
Capital at risk. The value of investments can fall as well as rise, and you may get back less than you put in. Past performance is not a guide to future returns.
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Tax relief is one of the main reasons pensions are treated differently from other savings. Money that would have gone in Income Tax goes into your pension instead. Here’s how relief is given and when you might need to claim extra.
Capital at risk. The value of investments can fall as well as rise, and you may get back less than you put in.
Good to know: This is general information, not personal advice. Pensions are long-term investments.
The value can go down as well as up, so you could get back less than has been paid in. Capital at risk.
For free, impartial guidance, use MoneyHelper. If you’re 50 or over with a defined contribution pension, you can book a free Pension Wise appointment.
The basics
You can get tax relief on private pension contributions worth up to 100% of your annual earnings. Relief is either added automatically or claimed by you, depending on the type of scheme and the rate of Income Tax you pay.
In simple terms, for a basic-rate taxpayer, every £100 that goes into your pension costs you £80. For higher-rate taxpayers, the effective cost can be lower still, once the extra relief is claimed.
Relief at source
All personal and stakeholder pensions, including SIPPs, and some workplace pensions use relief at source. You pay in from your take-home pay, and your pension provider claims tax relief from the government at the basic rate of 20% and adds it to your pot.
So if you pay £80, your provider adds £20 and £100 goes into your pension. This happens even if you don’t pay Income Tax: non-taxpayers can get 20% relief on contributions of up to 80% of their earnings, or up to £2,880 a year if they have no earnings.
If your rate of Income Tax in Scotland is 19%, your provider still claims relief at 20% and you don’t need to pay the difference.
A simple example
Say you’re a basic-rate taxpayer and pay £200 a month into a relief at source pension. Your provider adds £50, so £250 goes in each month.
Over a year, that’s £2,400 from you and £600 in tax relief. Try different amounts in our pension calculator, which can add basic-rate relief for you.
Net pay
In net pay schemes, your employer takes your pension contribution out of your pay before Income Tax is worked out. You pay less tax straight away, so you get relief at your highest rate automatically, with nothing to claim.
One thing to know: because relief comes through lower tax, people earning below the Personal Allowance of £12,570 don’t pay Income Tax and so may not benefit from net pay relief in the same way as relief at source. Your payslip or scheme information will tell you which method your workplace pension uses.
Claiming extra if you pay higher-rate tax
With relief at source, your provider only claims the basic 20%. If you pay Income Tax above 20% in England, Wales or Northern Ireland, you can claim extra on your Self Assessment tax return:
- 20% on contributions up to the amount of income you paid 40% tax on
- 25% on contributions up to the amount of income you paid 45% tax on
If you don’t file a Self Assessment return, you can usually claim through HMRC instead. Scotland has its own rates, with extra relief of 1%, 22%, 25% or 28% depending on your band.
| Taxpayer | Added by provider | Extra you can claim |
|---|---|---|
| Non-taxpayer | 20% | — |
| Basic rate (20%) | 20% | — |
| Higher rate (40%) | 20% | Up to 20% |
| Additional rate (45%) | 20% | Up to 25% |
The extra relief usually comes back to you as a lower tax bill or a refund, not as money added to your pension.
Limits to be aware of
The annual allowance is £60,000 a tax year across all your pensions, including employer contributions and tax relief. If you go over, you may have to pay a tax charge, although you may be able to carry forward unused allowance from the previous three years.
Your allowance can be lower if you have a high income (tapered when threshold income is over £200,000 and adjusted income over £260,000) or if you’ve flexibly accessed a pension.
Salary sacrifice
With salary sacrifice, you agree to give up part of your salary and your employer pays it into your pension instead. Because your salary is lower, you and your employer may pay less tax and National Insurance.
It isn’t technically tax relief, but it has a similar effect. A lower salary can affect things like borrowing and some benefits, so check with your employer.
Things to check
- Whether your workplace scheme uses net pay or relief at source.
- If you pay higher or additional-rate tax, whether you’ve claimed the extra relief.
- Your total contributions against the annual allowance.
- Your tax position — our take-home pay calculator shows your Income Tax bands.
FAQ
How much tax relief do I get on pension contributions?
Basic-rate relief of 20% is added automatically in relief at source schemes. Higher and additional-rate taxpayers can claim up to 20% or 25% more.
Do I get tax relief if I don’t pay tax?
In relief at source schemes, yes — on contributions up to 80% of your earnings, or up to £2,880 a year with no earnings.
How do I claim higher-rate relief?
Through your Self Assessment tax return, or by contacting HMRC if you don’t file one.
What’s the difference between net pay and relief at source?
Net pay takes your contribution before tax, so relief is automatic at your top rate. Relief at source takes it after tax and the provider adds 20%.
Is there a limit on tax relief?
Relief is limited to contributions worth up to 100% of your earnings, and the annual allowance of £60,000 applies across your pensions.
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Sources
Figures checked on 3 October 2026. Rules and rates change, so check the latest on GOV.UK.