A basic rate taxpayer will obtain 20% pension tax relief on contributions up to the earnings in a tax year
A higher rate taxpayer can claim 40% pension tax relief, and an additional rate taxpayer can claim 45% pension tax relief. A non-taxpayer can pay £2880 net into a pension scheme, and this is made up to £3,600 by £720 being contributed by the government.
The first 20% of tax relief can be automatically applied by your employer through the payroll with no further action required if you are a basic-rate taxpayer. If you are a higher rate or additional rate taxpayer, you can claim back any further reliefs on your self-assessment tax return. This is relief at source.
Some pension schemes use the net pay arrangement where tax relief is given by deducting the gross pension contributions from your earnings before you pay tax. There is therefore no tax relief to claim from HMRC.
The NEST and People’s Pension schemes operate relief at source – so if your income is such that you have been paying tax at 40% or 45% you may will be entitled to claim tax back from HMRC.
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