Tax on your private pension contributions

Your private pension contributions are tax-free up to a certain limit.

This applies to most private pension schemes, for example:

  • Workplace pensions
  • Personal and stakeholder pensions
  • Overseas pension schemes that qualify for uk tax relief - ask your provider if it’s a ‘qualifying overseas pension scheme’

Remember, you pay tax when you take money out of a pension.

Tax-free contribution limitations

You usually pay tax if savings in your pension pots go above:

  • 100% of your earnings in a year - this is the limit on tax relief you get
  • £40,000 a year – You will need to check your annual allowance
  • £1.03 million in your lifetime - this is known as the lifetime allowance 

You also pay tax on contributions if your pension provider:

is not registered for tax relief with HM Revenue and Customs (HMRC)

does not invest your pension pot according to HMRC’s rules

Tax relief

You can get tax relief on private pension contributions worth up to 100% of your annual earnings.

You get the tax relief automatically if your:

  • Employer takes workplace pension contributions out of your pay before deducting Income Tax
  • Rate of income tax is 20% - your pension provider will claim it as tax relief and add it to your pension pot (‘relief at source’)

If your rate of income tax in Scotland is 19% your pension provider will claim tax relief for you at a rate of 20%. You do not need to pay the difference.

You get relief at source in all personal and stakeholder pensions, and some workplace pensions.

UK tax relief is also available on contributions made to certain types of overseas pension schemes. 

It’s up to you to make sure you’re not getting tax relief on pension contributions worth more than 100% of your annual earnings. HM Revenue and Customs (HMRC) can ask you to pay back anything over this limit.

When you have to claim tax relief

You may be able to claim tax relief on pension contributions if:

  • You pay Income Tax at a rate above 20% and your pension provider claims the first 20% for you (relief at source)
  • Your pension scheme is not set up for automatic tax relief
  • Someone else pays into your pension

Claim tax relief in England, Wales or Northern Ireland

You can claim tax relief on your SATR for:

  • 20% if you pay Income Tax at 40%
  • 25% if you pay Income Tax at 45%
  • You can also contact HMRC to claim if you pay Income Tax at 40%.

Claim tax relief in Scotland

You can claim tax relief on your SATR for:

  • 20% if you pay Income Tax at 21% - you’ll get the remaining 1% through your pay
  • 21% if you pay Income Tax at 41%
  • 26% if you pay Income Tax at 46%

You can also contact HMRC to claim if you pay Income Tax at 21 or 40%.

If your pension scheme is not set up for automatic tax relief

Claim tax relief in your self assessment tax return (SATR) if your pension scheme is not set up for automatic tax relief.

You cannot claim tax relief if your pension provider is not registered with HMRC.

If someone else pays into your pension

When someone else (for example your partner) pays into your pension, you automatically get tax relief at 20% if your pension provider claims it for you (relief at source).

If you’re in a workplace pension that allows other people to contribute you may need to claim the tax relief on those contributions.

If you do not pay Income Tax

If both of the following apply you still automatically get tax relief at 20% on the first £2,880 you pay into a pension each tax year (6 April to 5 April):

  • You do not pay Income Tax, for example because you’re on a low income
  • Your pension provider claims tax relief for you at a rate of 20% (relief at source)

Life insurance policies

You cannot get tax relief if you use your pension contributions to pay a personal term assurance policy, unless it’s a protected policy.

Personal term assurance is a life insurance policy that either:

  • Ends when the first insured person dies
  • Insures people who are all from the same family

Tax on Pensions Part 2