We don’t support this browser anymore.
This means our website may not look and work as you would expect. Read more about browsers and how to update them here.

Skip to main content
  • Register
  • Help
  • Contact us

Is pension tax relief under threat?

With the autumn budget around the corner, we look at what might change.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

This article is more than 6 months old

It was correct at the time of publishing. Our views and any references to tax, investment and pension rules may have changed since then.

Philip Hammond will unveil his autumn Budget on Monday.

The Financial Times and Telegraph Money have both suggested he could reduce the annual allowance, which is the maximum amount that can be contributed to a pension. For most people, the limit’s currently £40,000. That’s for contributions made by you and your employer.

To get tax relief, your personal contributions can’t be any higher than your earnings, or £3,600, whichever is greater. With tax relief costing the government an estimated £41 billion last tax year, we can see why it’s a tempting target for the chancellor.

Of course it goes without saying, we can’t know for sure if any changes to the current rules will be introduced. But any changes that are announced could take effect immediately.

If you’re one of the almost 4.7 million people paying income tax at the higher or additional rate, your window in which to maximise contributions and receive tax relief under the current rules could be rather small.

Find out more about contributing to a pension

Could you benefit by acting now?

Under the current rules, the government automatically adds 20% to your contribution. Higher rate taxpayers can reclaim further tax relief through their tax return.

Maximum Tax relief for higher-rate taxpayers (40%)* Maximum Tax relief for top-rate taxpayers (45%)*
Under the current £40,000 annual allowance £16,000 £18,000
If annual allowance drops to £30,000 £12,000
(£4,000 less)
£13,500
(£4,500 less)

*You need to pay enough tax at the higher rate to receive the full amount of relief. Scottish taxpayers can claim different rates of tax relief to the rest of the UK.

Find out more about tax relief for Scottish taxpayers

Remember, once you add money to a pension, you can’t usually take it out until you’re 55 (57 from 2028).

How to invest up to £160,000 using 'carry forward'

Any tax benefits will depend on individual circumstances, and as highlighted, rules can change. Tax relief is only available to people under 75.

How much tax relief could you receive?

Do you have unused allowance?

You can carry forward any unused annual allowance from the last three tax years (up to £40,000 for each year).

This means you might be able to contribute as much as £160,000, and get up to £72,000 in tax relief. If you have any questions, the specialists on our carry forward helpline will be happy to help – 0117 314 1799.

It can work a bit differently for those who have a taxable income over £110,000, or those who’ve already accessed a pension, which might mean your allowance is lower.

How much could you pay in?

Secure your tax relief with a pension contribution

This year, we’ve already claimed £130 million in tax relief for clients who contributed to their HL self-invested personal pension (SIPP).

If you haven’t decided where to invest, you can make your contribution now and simply hold cash while you make your decision. The value of investments can fall as well as rise, so you could get back less than you put in.

This article isn't personal advice. If you're not sure if an investment is right for you, you can always ask us for advice.

More about the HL SIPP

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

Editor's choice – our weekly email

Sign up to receive the week's top investment stories from Hargreaves Lansdown. Including:

  • Latest comment on economies and markets
  • Expert investment research
  • Financial planning tips
Sign up

Related articles

Category: Investing and saving

Autumn statement – National Insurance tax change plus ways to help cut your tax bill

The headline grabbing National Insurance cut might look like good news, but the tax burden is still set to be the highest it’s been since the Second World War. Here’s what’s changed and what you can do to reduce your tax bill.

Helen Morrissey

30 Nov 2023 4 min read

Category: Pensions

Property and pensions – will your rental income be enough in retirement?

Rent prices have increased to record highs, but what does it mean for landlords who are banking on that income for retirement?

Alex Mears-Jennings

31 Oct 2023 3 min read

No results were found

Cash vs investing – where should investors look when the interest rate cycle turns?

With the interest rate cycle nearing its peak, we look at cash versus investing in the stock market, and where investors could look for opportunities.

Emma Wall

27 Oct 2023 6 min read

Category: Pensions

How long will my pension last?

With the number of people living to 100 reaching a new record high, we look at different strategies for making your pension last as long as your retirement.

Isabel McDougall

26 Oct 2023 3 min read