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.
You need to be under 75 to receive tax relief. You should also ensure that you don’t contribute any more than 100% of your earnings after tax relief have been received.
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
each year and receive
a government bonus of
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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.
* 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.
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.
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.
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 help you understand how tax relief and other tax rules apply to your retirement plans. Expert advice on using tax rules effectively could make a big difference. Start by booking a call with our helpdesk to find out more about our service and how it can help you.