Pension Tax relief

In England, when you contribute into your pension, which paid by the government - this is called the tax relief.

• If you are basic rate tax payer: you can get an extra 20% on your contributions

• If you are higher rate tax payer: you can get an extra 40% on your contributions

• If you are additional rate tax payer: you can get an extra 45% on your contributions

Included in the above is an automatic 20% tax relief if:

1. You are in a workplace pension where your pension contributions are deducted from your pay before income tax

2. or the pension provider claims 20% tax relief and adds it to your pension pot.

Dependent of what type of income taxpayer you are, you can claim additional pension tax relief if you reclaim this on your tax return.

The example below shows £10,000 pension contribution of which 20% is automatically paid into your pension:

• If you are basic tax payer - You pay £8,000, you will receive £2,000.

• If you are higher tax payer - You pay £8,000, and you can reclaim the £2,000 tax relief in your tax return. So the overall payment cost is £6,000. And you will receive £2,000

• If you are additional tax payer - You pay £8,000, and you can reclaim the £2,500 tax relief in your tax return. So the overall payment cost is £5,500. And you will receive £2,000