You can usually claim tax relief on private pension contributions worth up to 100% of your annual earnings, subject to the overriding limits. Tax relief is paid on pension contributions at the highest rate of income tax paid.
This means that if you are:
- A basic rate taxpayer, you get 20% pension tax relief.
- A higher rate taxpayer, you can claim 40% pension tax relief.
- An additional rate taxpayer, you can claim 45% pension tax relief.
The first 20% of tax relief is usually automatically applied by your employer 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.
The above applies for claiming tax relief in England, Wales or Northern Ireland. There are some regional differences if you are based in Scotland.
There is an annual allowance for tax relief on pensions of £60,000. This limit remains unchanged in the new 2024-25 tax year. There is also a rule that allows you to carry forward any unused amount of your annual allowance for three tax years.
The lifetime limit for tax relief on pension contributions was removed with effect from 6 April 2023 and has now been abolished.
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