Pension Tax Relief Calculator

What pension tax relief is worth at each tax rate

Pension tax relief gives back the income tax you would have paid on the money you contribute, at your highest rate. Every £100 that reaches your pension costs a basic-rate taxpayer £80, a higher-rate taxpayer £60 and an additional-rate taxpayer £55, once all relief has been claimed. Scottish taxpayers get relief at Scottish rates: 20% through the provider (even at the starter rate), rising to 48% for top-rate taxpayers once the extra relief is claimed.

Relief at source and net pay: the two ways relief is given

With relief at source, used by personal pensions, SIPPs and many workplace schemes, you pay from your take-home pay and the provider claims 20% from HMRC and adds it to your pot. You pay £80, the pot receives £100. Anyone paying more than 20% claims the difference.

With a net pay arrangement, common in occupational schemes such as the NHS and Teachers' Pension schemes, your employer takes the contribution from your pay before working out income tax. Full relief at your top rate is given automatically, and there is nothing to claim. The catch is for low earners: if your pay is below the £12,570 Personal Allowance, you pay no tax to get relief from, whereas a relief-at-source scheme would still add 20%.

Worked example: claiming higher-rate relief

Priya earns £65,000 and pays £4,000 into a SIPP. The provider adds £1,000, so £5,000 goes into her pension. She is a higher-rate taxpayer with £14,730 of income above £50,270, which is more than the gross contribution, so the whole £5,000 qualifies for the extra 20%.

HMRC extends her basic-rate band by £5,000, which cuts her tax bill by £1,000 once she claims through Self Assessment or by contacting HMRC. Her £5,000 pension contribution has cost her £3,000.

The same contribution reduces her adjusted net income to £60,000. If she claims Child Benefit for two children, the High Income Child Benefit Charge falls from £584 to £0, a further saving the calculator does not show unless you use the Child Benefit tool.

Limits on how much relief you can get

Relief is generous, but it is capped in several ways.

• Earnings cap: you get relief on contributions up to 100% of your UK earnings for the year. Someone with no earnings can still pay up to £2,880 a year into a relief-at-source pension and receive relief to make it £3,600.
• Annual allowance: £60,000 a year across all your pensions, including employer contributions. Above that, an annual allowance charge claws the relief back.
• Carry forward: unused annual allowance from the previous 3 tax years can be used, as long as you were a member of a registered pension scheme in those years.
• Tapered annual allowance: if threshold income is over £200,000 and adjusted income over £260,000, the allowance falls, to a minimum of £10,000.
• Money purchase annual allowance: once you have flexibly accessed a defined contribution pension, for example by taking taxable cash from drawdown, future contributions to defined contribution pensions are limited to £10,000 a year.

Mistakes that cost people relief

HMRC does not chase you to give you money. These are the most common ways relief goes unclaimed or is lost.

• Not claiming higher-rate relief on relief-at-source contributions. It is not automatic, even when your employer runs the scheme.
• Entering the net amount on a Self Assessment return instead of the gross amount. The return asks for the gross figure, including the 20% the provider added, so entering the net figure understates your basic-rate band extension by a fifth.
• Assuming salary sacrifice contributions need a claim. They do not: your taxable salary is already lower.
• Paying into a net pay scheme on earnings below the Personal Allowance, where there is no tax to relieve.
• Overlooking the Child Benefit charge and the £100,000 taper, where each £100 contributed can save far more than the headline rate.