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Pension tax relief

Get up to a 45% boost from the government

What is pension tax relief and how does it work?

To help you to save toward your retirement, the government gives you money each time you make a payment to your pension. This is known as pension tax relief.

The amount of tax relief you get usually depends on the rate of income tax you pay. If you’re a Scottish taxpayer, tax rates and bands differ, and so different rates of tax relief apply.

An extra20%in basic-rate tax relief

Basic-rate taxpayers and non-earners

The government will always give you 20% in basic-rate tax relief when you add money to your pension. Even if you don’t pay tax or are a non-earner.

For example, if you added £800 to your pension, the government will add an extra £200 in tax relief.

Up to an extra45%in higher-rate tax relief

Higher and additional-rate taxpayers

If you’re a higher-rate taxpayer, you can get up to 40% tax relief. Meaning a £10,000 pension payment, could cost you as little as £6,000.

If you’re an additional-rate taxpayer, you can get up to 45%.

Just be aware, you must pay sufficient tax at the higher or additional rate to claim the full 40% or 45% 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 page.

Are there any rules or limits on pension tax relief?

You must be under age 75 to get tax relief. There are also limits on how much tax relief you can receive and how much you can pay into a pension.

You’ll only get tax relief on personal pension contributions up to 100% of your UK earnings, or £3,600 if this is greater (if you’re a low or non-earner).

Let’s say you earned £35,000 a year. The maximum you could pay in across all your pensions and benefit from tax relief would be £35,000. You would pay in £28,000 and the government would add £7,000 in basic-rate tax relief on top to bring the total contribution to £35,000.

Your pension contributions, including any made by your employer, are also limited by the annual allowance which is currently £40,000 each tax year for most people. If you’ve already taken money out of a pension, or you’re a higher earner, your annual allowance could be much lower.

How much can I pay into a pension?

How to claim pension tax relief

For personal pensions (such as the HL SIPP), and certain workplace pensions, basic-rate tax relief is usually claimed back automatically by your pension provider. If you pay higher rates of tax, you'll usually need to complete a self-assessment tax return to claim higher-rate tax relief. Then the money will be paid to you personally and not into your pension. Read our guide to claiming back higher-rate tax relief for more information.

For other pension schemes, tax relief is typically received by reducing the amount of income tax you pay.

Make the most of tax relief with a SIPP

If you open an award-winning HL Self-Invested Personal Pension, you can look forward to the main pension tax benefits. As well as getting tax relief, you can shelter your money from UK income and capital gains tax. Plus you’ll benefit from:

  • Security
    We're a FTSE 100 company, trusted by 1.7 million clients and regulated by the Financial Conduct Authority.
  • Award winning service
    Best Buy Pension 2022 from the Boring Money Awards and Best SIPP Provider from the UK Investor Magazine 2021 Awards.
  • Ease
    Check your pension anytime online or with the HL app whenever you like.
  • Ongoing support
    Get help from our UK-based helpdesk and the answers to your questions no matter how big or small.

Tell me more about the HL SIPP

Guide to SIPPs

Download this essential guide to learn more about SIPP tax benefits and how pension tax relief works.

Download the guide

Two ways to add money to your SIPP

The quickest way to top up your account is online, you’ll just need your debit card or bank account details to hand.

1. Make a lump sum payment

You can make a one-off lump sum payment from as little as £100. You only need to pay £80, and we’ll claim 20% tax relief to take the total payment to £100.

2. Start or increase a regular saving

Set up monthly payments from as little as £25 (pay £20, and we’ll claim £5 in tax relief). Or increase an existing direct debit instruction.

Frequently asked questions

Taxes in retirement

Even though you get tax relief from the government when you add money to your pension, it doesn’t mean you won’t have to pay tax on that money in the future.

When you take money from a pension, you can usually take up to 25% completely tax free. The rest is taxed as income when you withdraw it.

Remember though, you can’t normally access the money in a pension until age 55 (rising to 57 in 2028).

More on taxes in retirement

Tax relief guide

More information and useful tips.

Download the guide