Tax on your private pension contributions
2. Tax relief
You can get tax relief on private pension contributions worth up to 100% of your annual earnings.
You get the tax relief automatically if your:
- employer takes workplace pension contributions out of your pay before deducting Income Tax
- pension provider claims tax relief for you at a rate of 20% and adds it to your pension pot (‘relief at source’)
You get relief at source in all personal and stakeholder pensions, and some workplace pensions.
It’s up to you to make sure you’re not getting tax relief on pension contributions worth more than 100% of your annual earnings. HM Revenue and Customs (HMRC) can ask you to pay back anything over this limit.
When you have to claim tax relief
You may be able to claim tax relief on pension contributions if:
- you pay Income Tax at a rate above 20% and your pension provider claims the first 20% for you (relief at source)
- your pension scheme isn’t set up for automatic tax relief
- someone else pays into your pension
If you pay 40% Income Tax
If you pay 45% Income Tax
You can only claim tax relief on the extra 25% in your Self Assessment tax return if you pay Income Tax at the 45% rate.
If your pension scheme isn’t set up for automatic tax relief
Claim tax relief in your Self Assessment tax return if your pension scheme isn’t set up for automatic tax relief.
Call or write to HMRC if you don’t fill in a tax return.
You can’t claim tax relief if your pension provider isn’t registered with HMRC.
If someone else pays into your pension
When someone else (for example your partner) pays into your pension, you automatically get tax relief at 20% if your pension provider claims it for you (relief at source).
If you’re in a workplace pension that allows other people to contribute you may need to claim the tax relief on those contributions - call or write to HMRC.
If you don’t pay Income Tax
You still automatically get tax relief at 20% on the first £2,880 you pay into a pension each tax year (6 April to 5 April) if both of the following apply to you:
- you don’t pay Income Tax, for example because you’re on a low income
- your pension provider claims tax relief for you at a rate of 20% (relief at source)
Life insurance policies
You can’t get tax relief if you use your pension contributions to pay a personal term assurance policy, unless it’s a protected policy.
Personal term assurance is a life insurance policy that either:
- ends when the first insured person dies
- insures people who are all from the same family