Let’s take a look at an example
Kate earns £30,000 gross a year. She contributes 5% (including tax relief) into her relief at source pension. So, Kate puts in £100 a month, and this is topped up by another £25 of tax relief from HM Revenue and Customs (HMRC). Her employer also pays 3% that is £75 per month. That means the total going into Kate’s pension pot each month is £200. Kate's total contribution, including tax relief, is £125 per month.
How much tax relief you get depends on your salary, other income you may have and the pension contributions you make.
- If you are a basic rate tax payer, tax relief is 20%.
- If you pay tax at a higher rate, you may be entitled to 40% or 45% tax relief on all or part of your pension contributions.
- As the pension scheme provider gives basic rate tax relief at source, if you pay tax at a higher rate, you will have to claim the additional 20% or 25% tax relief you may be entitled to directly from HMRC. You can do this through your self assessment tax return or by contacting HMRC online, by phone, or in writing.
The information shown is relevant to standard UK tax payers.
Different rates of tax may apply to Scottish and Welsh tax payers. The value of any tax relief depends on your individual circumstances. This information is based on our understanding of current taxation law and HMRC practice, which may change. The value of investments can fall as well as rise, and isn’t guaranteed. The value of your pension pot when you take benefits may be less than has been paid in.