Pension Tax Relief: How It Works and How to Claim
You can get tax relief on private pension contributions worth up to 100% of your annual earnings. GOV.UK says relief is added automatically through net pay, or through relief at source at the basic 20% rate. If you pay 40% or 45% Income Tax in England, Wales or Northern Ireland, you may claim extra relief through Self Assessment. Scotland has different Income Tax rates.
More guides are in the pensions hub.
How much relief you can get
Private pension contributions are tax-free up to certain limits for most workplace, personal and stakeholder pensions registered with HMRC. You cannot claim relief if the scheme is not registered.
You can get relief on contributions up to 100% of your annual earnings. GOV.UK warns you usually pay tax if pension savings go above 100% of earnings in a year or above £60,000 (the annual allowance). It is your responsibility not to get relief on more than 100% of earnings; HMRC can ask you to pay back excess relief.
Net pay and relief at source
Net pay: your employer deducts contributions from pay before Income Tax, so you get full relief whether you pay basic, higher or additional rate. The payslip shows your contribution plus the relief. You do not get relief if you do not pay tax, for example if earnings are below the tax threshold.
Relief at source: contributions are taken after tax and National Insurance; the provider claims relief at the basic 20% rate and adds it to your pot. The payslip shows only your contribution. Relief at source is used in all personal and stakeholder pensions and some workplace pensions.
For relief at source you give the provider your name, address, date of birth, National Insurance number and employment status. If you are auto-enrolled, your employer may supply details and you must confirm them within 30 days when asked.
If you do not pay Income Tax
With relief at source, the provider can claim 20% on contributions each tax year (6 April to 5 April) up to 80% of your earnings, or £2,880 if you have no earnings. GOV.UK says you still get the additional payment even if you do not pay Income Tax when the scheme uses relief at source.
Net pay schemes do not add relief when you do not pay tax.
Claiming extra relief at higher rates
You must claim relief yourself if you pay Income Tax above 20% and your provider uses relief at source, if your scheme is not set up for automatic relief, or if someone else pays into your workplace pension.
In England, Wales or Northern Ireland, on your Self Assessment return you can claim 20% extra up to the amount of income you paid 40% tax on, and 25% extra up to the amount you paid 45% tax on. If you do not file Self Assessment, GOV.UK describes a separate way to claim. Scotland has different rates.
GOV.UK’s example: in the 2024 to 2025 tax year you earn £60,270 and pay £12,000 into a relief at source scheme. You can claim an extra 20% on £10,000 (the part taxed at 40%) and no extra on the remaining £2,000.
If your partner pays into your relief at source pension, you automatically get 20% on their payment.
The annual allowance
The annual allowance is the most you can save in your pension pots in a tax year before tax charges: £60,000 this tax year. It covers all private pensions together, including employer contributions and defined benefit increases.
You might carry over unused allowance from the previous three tax years. It may be lower if you have flexibly accessed your pension (the money purchase annual allowance can drop to as low as £10,000) or if you have high income (tapered allowance when threshold income is over £200,000 and adjusted income over £260,000).
If you go over, you or your provider pays the tax and you report it in the Pension savings tax charges section of Self Assessment.
When you take money out
When you take money from a pension, GOV.UK says you can usually take up to 25% of what you built up as a tax-free lump sum, up to a maximum of £268,275 (the lump sum allowance). The lifetime allowance was abolished on 6 April 2024. If you take a lump sum above your allowances, you pay Income Tax on the extra amount.
Frequently asked questions
Is pension tax relief automatic?
Net pay and relief at source schemes add basic relief automatically. If you pay Income Tax above 20% and your provider uses relief at source, you must claim the extra relief yourself, usually through Self Assessment.
Do I get tax relief if I do not pay Income Tax?
With relief at source, the provider can claim 20% on contributions up to 80% of your earnings that year, or £2,880 if you have no earnings. Net pay schemes do not give relief if you do not pay tax.
How do higher rate taxpayers claim the extra relief?
In England, Wales or Northern Ireland, on Self Assessment you can claim 20% extra up to income taxed at 40%, and 25% extra up to income taxed at 45%. Scotland has different rates.
What is the annual allowance for 2026 to 2027?
The annual allowance is £60,000 this tax year. It applies to all your private pensions together, including employer payments and defined benefit increases.
Can I carry forward unused annual allowance?
You might be able to carry over unused allowance from the previous three tax years. The allowance may be lower if you have flexibly accessed your pension or have high income.
Sources
Disclaimer: This article is general information and not personal financial, tax or legal advice. Check your own situation with HMRC, GOV.UK or a regulated adviser.