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How tax relief works

Enjoy up to 46% tax relief in your pension

Pension tax relief

No matter how much tax you pay, the government will always add 20% in tax relief to your pension. So if you put £8,000 in your pension, the government will add an extra £2,000, bringing the total amount to £10,000.

You should ensure that you do not contribute any more than 100% of your earnings after tax relief has been received, or £3,600 if this is greater.

Please note that the 46% rate of tax relief is only available to Scottish taxpayers. The maximum rate of tax relief for the rest of the UK is 45%.

Invest up to

£40,000

each tax year

each year and
receive tax relief of up to

and receive
tax relief of up to

46%

Adding money to your pension

If you’re UK resident, you can usually add as much as you earn and receive tax relief each year. There is also an annual allowance (£40,000 for most people) which limits what you can pay in. Each contribution includes the money you put in, as well as what the government adds in tax relief.

Pension tax relief calculator

Find out how much tax relief you could get from your pension contributions.

This year I can contribute

£

My annual taxable income is

£

* For more details of the Scottish rate of Income Tax please see our Scottish income tax changes page.

Higher and top-rate taxpayers

If you pay 40% income tax, you can claim back up to an extra 20% on your tax return. That means a £10,000 pension pot could effectively only cost you £6,000.

If you’re a 45% taxpayer, you can claim back up to 25% on your tax return.

You must pay sufficient tax at the higher or top-rate to claim the full 40% or 45% tax relief.

If you’re a Scottish taxpayer, you can claim up to 46% tax relief. Take a look at our information on the Scottish income tax changes page.

  • Earn over £100,000?
    The government reduces your tax-free personal allowance by £1 for every £2 you earn over £100,000. But if you put enough money in your SIPP, you could reduce your taxable income and still get between 40% and 60% tax relief.
  • Don’t have an income or pay tax?
    Even if you don’t earn money or pay tax, you can still pay in up to £3,600 to your pension each year and the government will add 20% in tax relief. So if you add £2,880 to your pension, the government would boost it by £720.

Tax rules can change over time and the relief you receive depends on your circumstances.

Download your Guide to Tax Relief

Download your Guide to Pension Tax Relief

Have a look at our Guide to Pension Tax Relief to find out more about how the system works and how some high earners could receive £58,500 in tax relief.

Or download our Guide to SIPPs to learn more about how SIPPs work.

Taking money from your pension

Any time after your 55th birthday (57th from 2028) you can start to take money from your pension, even if you’re still working.

Tax and withdrawing money

Usually you can take up to 25% of your pension tax free. It’s up to you how you take the rest, which will be taxed as income.

More flexibility

A more flexible pension opens up a world of options. With the HL SIPP, you can take as much or as little money from your pension as you like. This gives you at least some control over how much tax you pay.

Take your whole pension in one go, or in smaller amounts as and when you want. You could also take money from your pension as a regular income, with an annuity or drawdown. Or you can leave your pension invested if you don’t need it yet.

When it comes to choosing how to take money from your pension, just remember you may need your pension to last throughout your retirement.

Find out more about your options at retirement

Still unsure?

Need help learning about your retirement options and making decisions that are best for you? The government's free Pension Wise service provides impartial guidance face-to-face, online, or by phone.

Our financial advisers can also help recommend investments and talk you through your options. Sign up for a free, 30-minute consultation to find out if advice is right for you.