Tax relief on pension contributions: How to claim

Are you owed thousands of pounds by the taxman? How to claim a rebate on your pension contributions if you pay higher-rate tax.

£1.3 billion of pension tax relief went unclaimed in the 5 years ending in April 2021, according to analysis by the pension provider PensionBee. If you’re one of the huge number of eligible higher-rate taxpayers who routinely fail to claim tax relief on their pension contributions, it’s time to discover what you’re owed. Our case study, Tony, got £1,800 – find out how he did it.

What is pension tax relief?

There’s a reason that pensions are touted as one of the best ways to save for your retirement. Every penny you save into a pension pot (up to an annual limit of £60,000 in 2024/2025) is eligible for tax relief.

If you’re a basic-rate (20%) taxpayer, this means that for every £80 of net pay (your take-home pay after tax) you contribute to a UK workplace or personal pension, you’ll actually be saving £100 into your pension. If you pay tax at a higher rate than this, the benefits can be even greater.

How does pension tax relief work?

There are 2 main ways in which you can automatically get tax relief on UK pension contributions. If you’re in a workplace pension, your employer decides which method to use. If you pay into a personal pension, “relief at source” will be used – we explain this below.

Net pay

Many but not all workplace pensions use this. Your employer will deduct your agreed pension contribution from your gross pay, before any tax is deducted. So you’ll pay tax on your earnings only after your pension contribution has been deducted.

With this approach, you’ll get the full amount of pension contribution tax relief you’re eligible for, regardless of what tax rate you usually pay.

Relief at source

With this approach, your pension contributions are either made by your employer after tax has been deducted from your pay or, if you’re self employed, directly by you from your taxable earnings.

Your pension provider will then claim basic-rate (20%) relief directly from the government. This will be added to your pension pot. If you live in Scotland and pay the 19% “starter rate” tax, you’ll still get 20% tax relief at source.

This is where things get a bit trickier if you pay tax at a higher rate. With the relief at source method, you don’t automatically get back the full amount of tax you’ve paid above 20%. Instead, you’ll need to apply for a tax rebate.

What is a tax rebate on pension contributions?

A tax rebate on your pension contributions is where, if the correct tax relief (allowance) hasn’t been applied via net pay or relief at source, you can claim back the tax on money you’ve paid into your pension.

Case study: Tony got a £1,800 rebate after writing to HMRC

Tony May profile pic
Tony May

Higher-rate taxpayer, London

I wrote a letter to HMRC in August 2023 to claim my rebate. In November 2023, I got a cheque for just over £1,800.

My advice is first to check with your company's HR team to see if you had a relief at source pension scheme for the years in question. If you're a UK employee paying higher-rate tax and you were paying relief at source at any point in the previous 4 years, or you've contributed to a private pension in that period, and you haven't completed a self assessment (tax return), you could be owed a decent chunk of change.

In my letter, I included my gross pension contributions for the tax years I was claiming for (what I contributed plus what the government added). You can get those details from your online pension account. And I added the total rebate figure - this is 20% of the total contributions over that period.

There's no online way to claim for previous years – I had to send it by snail mail! HMRC took just short of 3 months to get back to me. They let me know via email and my online personal HMRC account once they'd reviewed it (it's worth setting up an account if you don't already have one) and the cheque arrived a few days later.

If there's one thing you'd tell a friend who's thinking of getting this, what would it be?

For future years I'd recommend submitting this info via a self assessment form at the end of each tax year.

Download Tony’s letter

Tax relief on pension contributions: Calculator

You can use this calculator to find out how much tax on pension contributions you may be able to reclaim from HMRC if your pension scheme uses ‘relief at source’. Note that not everyone is eligible for a tax rebate – the full breakdown of who can claim is below – and there is a maximum limit going back 4 years if you do make a claim.

Pension tax relief rebate calculator

Enter your gross earnings for as many of the tax years below as you like, plus the pension contributions you made (but not any that your employer made).

2023/24 tax year

£
£

2022/23 tax year

£
£

2021/22 tax year

£
£

2020/21 tax year

£
£

Fill in the fields above to estimate the rebate you could be entitled to.

Who can claim a tax rebate on pension contributions?

There are several groups who may be able to claim a tax rebate on their pension contributions.

Higher or additional-rate taxpayers contributing to a “relief at source” pension

This is the most common instance when people claim a tax rebate. If your workplace or personal pension uses the relief at source method, you’ll automatically get just basic-rate (20%) tax relief applied. This means that if you pay tax at a higher rate, you’ll need to claim back the extra.

This applies to:

  • Higher (40%) and additional-rate (45%) taxpayers in England, Northern Ireland and Wales
  • Intermediate (21%), higher (41%) and advanced-rate (45%) taxpayers in Scotland.

If someone else contributes to your pension

You can’t claim back tax relief on your employer’s contributions to a workplace pension. But if your spouse or someone else makes personal contributions to your pension pot, their contributions are eligible for tax relief.

Third-party contributions are treated as if you’d made the contributions yourself, so you – rather than the other person – receive the pension contribution tax relief, and it’s your tax rate – not theirs – that applies.

If you’re a higher or additional-rate taxpayer, you can claim back the additional 20 or 25% on any money paid into a relief at source pension pot by someone else.

If the other person contributes to a workplace pension of yours that uses “net pay” tax relief, it’s likely that no tax relief will be applied to their contributions automatically. In this case, you’ll need to claim a rebate for the full amount from HMRC.

If you pay money into certain overseas pensions

You can get UK tax relief on contributions you make into some types of overseas pension scheme, up to the value of your earnings that are subject to UK income tax. You can find out more about when you can claim tax relief on overseas pensions on gov.uk.

If your UK pension isn’t set up for automatic pension contribution tax relief

The vast majority of personal and workplace pension schemes in the UK will be set up for automatic tax relief using either the net pay or relief at source methods. If, for some reason, this isn’t the case, you can apply to HMRC for a rebate of the full amount of tax relief.

Is it worth claiming tax relief on pension contributions?

In most cases, absolutely! Our scenario, below, shows why.

How does it work in practice?

Let’s say that, in the 2022-23 tax year, your taxable earnings were £60,000, meaning you’re a higher-rate taxpayer. In England, Wales and Northern Ireland, this means you’ll have paid 40% income tax on anything above £50,270. The thresholds and rates are different in Scotland, but the same principle applies.

And let’s say that, in the same year, you paid £4,000 (from your net pay) into a personal pension scheme that applies basic-rate tax relief at source. Your pension scheme will have claimed 20% basic-rate tax relief, worth £1,000, from the government and added it to your pension. This makes your gross pension contribution £5,000.

As a higher-rate (40%) taxpayer, you can claim back an additional 20% of your gross contribution – so another £1,000 – from HMRC. And that’s just for one year! We think that’s well worth having.

The experience of our case study Tony May, above, shows how you can reclaim for several years’ worth of unclaimed tax relief.

How can I reclaim overpaid tax on pension contributions?

There are 2 main ways to reclaim overpaid tax and get a tax rebate on pension contributions.

  1. Via a tax return. If you complete an annual self-assessment tax return, you should use this to claim any pension contribution tax relief that you haven’t received automatically. Just fill in the relevant section on the online form.
  2. By contacting HMRC directly. Use this method if you don’t complete a tax return. HMRC can help you work out how much to claim and explain how to do so. You can use the letter our case study used as a template.

How far back can I claim tax relief on pension contributions?

You can get a rebate for previous years’ tax relief – up to a limit. You have 4 years from the end of the tax year in which the overpayment arose to claim a refund. So if, for example, you hadn’t claimed back tax in the 2020-21 tax year, you’d have until April 2025 to apply for a rebate.

If you don’t claim within this 4-year timeframe, that year will become “closed” for claims, and you will usually miss out on a refund. There is one exception to this, under a rule known catchily as “Extra-statutory Concession B41”.

This rule states that “repayments of tax will be made in respect of claims made outside the statutory time limit where an over-payment of tax has arisen because of an error by the Inland Revenue or another government department, and where there is no dispute or doubt as to the facts”.

This boils down to: if HMRC or another government department has made a mistake in your tax calculations, and you can prove it, you may be able to claim back tax beyond the usual 4-year period.

How can I claim tax relief for pension contributions in previous years?

The methods you can use for claiming tax for years prior to the last tax year depend on how far back you are making a claim for.

Customers can amend a tax return for up to 12 months after it was due. Let’s say, for example, that you’d submitted your tax return for 2022/23 by the deadline of 31 January 2024. If you then realised that you had forgotten to claim higher or additional rate pension tax relief for that tax year, you could amend your tax return up to 31 January 2025.

If you don’t complete a tax return, or if you’ve missed the deadline for amending a tax return for a year you wish to claim for, you will need to write to HMRC. In the letter, you’ll need to detail the value of your pension contributions for relevant tax years, as well as any relevant information concerning their claim.

You’ll also need to write to HMRC if you’re claiming for earlier tax years because of a government department’s error. You’ll need to clearly outline the circumstances of the error and make a case as to why HMRC should repay you.

What documents do I need for a claim?

In most cases, if you’re claiming within the standard 4-year period outlined above, you won’t need to supply any documentation. You’ll just need to state how much you’ve paid into your pension on either your tax return or communication to HMRC. It will work out how much tax rebate you might be due.

You’ll also need to provide your personal details – such as your bank account details – so that you can receive the tax relief. If HMRC does ask for evidence, you can ask your pension provider to give you a statement.

If you’re claiming back for previous tax years that are now “closed” to claims, on the basis that a government department has made an error in your tax calculations, you may need to provide additional evidence. Ask HMRC what evidence it needs.

How much pension contribution tax relief can I claim?

Most people can claim tax relief on annual pension contributions up to the lower of:

  • £60,000 a year
  • 100% of annual earnings

If your annual pension contributions exceed these levels, they won’t qualify for tax relief.

There are some other restrictions, too, but most people won’t hit them. For example, if you’re lucky enough to earn more than a certain amount – £260,000 in 2024/25 – your annual tax-free contribution allowance is reduced by £1 for every £2 you earn above this, down to a minimum annual allowance (£10,000 in 2024/25).

Do I get pension contribution tax relief if I’m not a taxpayer?

If you don’t earn enough to pay basic-rate tax, then whether you get pension tax relief depends on the tax relief method that’s applied to your pension. If your employer used the “net pay” method, you don’t get tax relief as the pension contributions are deducted “before tax”. However, to compensate for this, the government has introduced a form of “top-up” payment to encourage contributions to a workplace scheme by lower earners, with the first top-up payments being made in the 2025/26 tax year.

If you pay into a pension that uses the relief at source method, you’ll benefit from 20% tax relief on the first £2,880 you pay into a pension each year.

How will I receive any pension tax refund?

Unlike the basic-rate tax relief that’s applied at source, any tax relief you claim via a tax return or directly from HMRC isn’t automatically added into your pension pot. There are different ways you might get it.

If you already owe HMRC tax (for example if you’re self-employed and have filled in a tax return to work out how much you owe for the previous tax year), any pension tax relief will be deducted from the total tax bill.

If you don’t owe HMRC any other tax, then one of the following may happen:

  1. HMRC may adjust your tax code so that your tax bill is reduced the following year.
  2. You may receive it as a tax rebate, into a nominated bank account or via cheque.

Then it’s up to you what you do with the money. You can add it to your pension pot but you don’t have to.

Bottom line

If you’re a higher-rate taxpayer whose pension applies relief at source, or if someone else has contributed to your pension, it’s a no-brainer to claim this rebate.

It’s easy to do via a self-assessment tax return. And even if you don’t complete one, you can claim a rebate directly from HMRC, for up to the last 4 years. Use the advice in this guide to make sure you don’t miss out on money you’re due.

Frequently asked questions

The tax you need to pay depends on your individual circumstances and can change over time. This content is for information only - it's not tax advice. You're responsible for carrying out your own checks and for getting professional advice before making financial decisions.

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