Pension Tax Relief Calculator
How it works
UK pensions get tax relief at your marginal Income Tax rate. Three mechanisms exist:
Relief at source: you pay net (e.g. £80), the provider claims basic 20% (£20) so £100 goes in. Higher/additional rate taxpayers reclaim the extra (20% or 25% on the gross) via Self Assessment.
Net pay: contribution deducted before tax — full relief automatically, but you don't see the basic-rate top-up in the pension.
Salary sacrifice: you give up gross salary in exchange for employer contribution — saves both Income Tax AND National Insurance (12% / 2%), plus often NI saving from employer too.
Worked example
Higher-rate taxpayer (40%) pays £8,000 net into a personal pension (RAS):
- Basic relief grosses up to £10,000 in the pension
- Higher-rate reclaim via Self Assessment: £2,000
- Effective cost from take-home: £6,000 for £10,000 in pension
Who should use this
- •Higher-rate taxpayers contributing to personal pensions or SIPPs
- •Anyone deciding between personal contribution and salary sacrifice
- •People near £100k considering using pension to recover personal allowance
Common mistakes
- ×Higher-rate taxpayers not claiming the extra 20%/25% relief via SA
- ×Exceeding the £60k Annual Allowance (charged at marginal rate)
- ×Forgetting the £10k MPAA after flexibly accessing a DC pension
- ×Not using carry-forward from previous tax years
Frequently asked questions
How much can I contribute and get relief?▾
Up to 100% of your relevant UK earnings, capped at the £60,000 Annual Allowance (2025/26).
Do I claim higher-rate relief automatically?▾
Only with net pay or salary sacrifice schemes. Relief-at-source schemes require you to claim via Self Assessment or HMRC tax-code change.
Is salary sacrifice always better?▾
Almost always — it saves NI as well as Income Tax. Check it doesn't drop you below minimum wage or affect mortgage applications.
What is the Annual Allowance taper?▾
For incomes over £260k, the £60k Annual Allowance reduces by £1 for every £2 over, down to a minimum of £10k at £360k+.
Can I carry forward unused allowance?▾
Yes — up to 3 previous tax years if you were a member of a registered pension scheme in those years.