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How does the private pension tax relief work?

  • 2 min read
  • Last updated 2 Apr 2024

When you save into a pension, you may be entitled to a tax relief on pension contributions. This is called a private pension tax relief.

This is more or less equal to the tax you paid on the portion of the income that you paid into your pension.

Do I get tax relief on all my private pension contributions?


There are two main ways to save money into your pension:

  1. Net pay or salary sacrifice: your employer will deduct the pension contribution before calculating tax on your pay
  2. Relief at source: here, the pension contribution is deducted after tax is calculated. HMRC will pay you a part of your tax automatically (what you paid at the basic rate), and if you pay more than 20% tax then you’ll need to submit a tax return and claim the rest (another 20-25%). This is how most private pensions and SIPPs work.

How much tax relief can I get?

Your situation

Outlined number oneImage of an arrow
What pension scheme is your employer using?
Your annual income
Pension contributions


Outlined number two
  • Pension contributions
  • Automatic tax relief
  • Extra tax relief you can claim

How your pension tax relief is calculated

HMRC will basically give you back the tax that you paid on the income that you used for your pension contribution.

In your case you earned £49,000 and contributed £1,000 to your pension.

Automatic Tax relief

You get £250

Your pension provider will automatically get this for you and add it to your pension pot.

Your pension pot will now be worth £1,250.

This is great – how much can I contribute into my private pension?

In the 2024/25 tax year, you are allowed to contribute either:

  • 100% of your income in a year
  • £60,000 a year – this is your ‘annual allowance

From 6th April 2023, the pension lifetime allowance has been abolished.

Do I need to do anything to get the automatic tax relief?

This depends on the rate of income tax you pay. If you’re a basic rate taxpayer (you’re earning under £50,270 in 2024/25), your pension provider will claim a 20% tax relief and add it to your pension pot.

In this case you don’t need to do anything.

When do I need to submit a Self Assessment tax return?

In one of these situations:

  • You’re a higher rate taxpayer (earn more than £50,270) – you submit it so you can claim the additional tax relief (another 20-25% on top of the automatic 20% relief)
  • You contributed more than your allowance and you got too much automatic tax relief – you’ll need to pay it back
  • Your pension provider is not using automatic tax relief (most do, though).

You can also call HMRC to claim if your income is between £50,271 and £125,140, and they’ll just give you your tax relief through your tax code.

What you need to know if you earn over £100,000

If your an additional rate taxpayer (your income, together with the pension contributions that you make, goes over £125,140) then your annual allowance will be reduced.

The calculation is pretty complex, so as a rule of thumb just remember that when you earn over £200,000 in income you’ll only be able to contribute about £10,000 to your private pension (unless you use “salary sacrifice” or net pay).

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