You can typically claim tax relief on private pension contributions up to 100% of your annual earnings, subject to certain limits. Tax relief is applied at your highest rate of income tax, meaning:

  • Basic rate taxpayers receive 20% pension tax relief
  • Higher rate taxpayers can claim 40% pension tax relief
  • Additional rate taxpayers can claim 45% pension tax relief

For basic-rate taxpayers, the initial 20% tax relief is usually applied by the employer. Higher and additional rate taxpayers can claim the extra relief through their self-assessment tax return.

Taxpayers can claim on their self-assessment return for private pension contributions as follows:

  • 20% relief on income taxed at 40%
  • 25% relief on income taxed at 45%

Alternatively, taxpayers can contact HMRC to claim the relief if they pay 40% income tax and do not submit a self-assessment return.

These rates apply in England, Wales, and Northern Ireland, but there are some regional variations for Scotland.

There is an annual allowance of £60,000 for pension tax relief. Taxpayers can carry forward any unused allowance from the previous three tax years, provided they made pension contributions during those years. The lifetime limit for pension tax relief was abolished as of 6 April 2023.

Source:HM Revenue & Customs | 23-09-2024
Categories: Pension

by Admin

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