Pension Tax Relief

By contributing to a private pension scheme, you can claim tax relief on pension contributions worth up to 100% of your annual earnings, subject to the annual allowance (£60,000 for the 2024/25 tax year). The government provides tax relief at the basic rate of 20%, which is added directly to your pension.

This means that for every £80 you contribute, you can get tax relief of £20 from the government, increasing your savings. If you pay income tax at a higher rate, you can claim additional tax relief on your self-assessment—20% for higher-rate taxpayers and 25% for additional-rate taxpayers—making a private pension an excellent tool for tax-efficient saving.

How To Claim Pension Tax Relief?

Tax relief on your private pension is typically applied automatically at the basic rate (20%) when you make contributions. If you’re a higher rate tax or additional-rate taxpayer, you’ll need to claim the extra relief through your self-assessment tax return. Our pension experts can guide you through the process, ensuring you claim everything you’re entitled to and maximizing your savings.

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Our Pension Expert

Our pension experts are here to help you make the most of your pension contributions. Here’s what you can expect from your pension scheme:

  • Maximized savings
  • No mistakes with us
  • Step-by-step support
  • Up-to-date knowledge
  • Personalized guidance
  • Clear financial forecasting
  • Free service and consultation

Private pensions offer several key advantages. Contributions are considered an allowable business expense, meaning that a £10,000 contribution could save you £1,900 in corporation tax and up to £2,745 in dividend tax if you’re a higher-rate taxpayer.

Not only does this reduce your tax bill, but it also boosts your retirement savings, offering long-term financial security.

While private pensions are highly beneficial, it’s important to consider some drawbacks of the pension provider. Your pension savings are typically inaccessible until you turn 55 (57 from 2028), and withdrawing more than 25% of your pot as a lump sum may be subject to tax.

Additionally, the value of your investments in the pension scheme can go up or down, depending on market performance.

  1. Start saving early to maximize investment growth and benefit from compound interest.
  2. Regularly review your pension contributions to ensure they align with your income and tax bracket.
  3. Use salary sacrifice schemes to reduce your taxable income while boosting pension contributions.
  4. Take advantage of carry-forward rules, allowing you to contribute more than the annual allowance by using unused allowances from the past three years.
  5. Work with a financial expert to tailor your pension strategy to your specific circumstances, ensuring you get the best possible tax relief and pension growth.
  1. Set up a workplace pension plan with a pension provider that suits your retirement goals.
  2. Contribute regularly up to the annual allowance (£60,000 in 2023/24), or more if using unused allowances from previous years.
  3. Receive tax relief automatically from the government at the basic rate, with any additional relief claimed via self-assessment.
  4. Monitor and grow your pension with regular reviews and adjustments to your investment strategy.
  5. Plan your withdrawals when you retire, with 25% available tax-free and flexible options for the remaining amount.
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FAQ - Higher Rate Tax Relief

No, you can withdraw 25% of your total pension pot tax-free in one go, or take smaller tax-free lump sums over time, but not every year, according to gov.uk guidelines.

You can take 25% of your total pension pot tax-free. The remaining 75% is subject to income tax at your normal rate.

While you can’t avoid tax on the entire pension, you can minimize it by withdrawing your 25% tax-free lump sum strategically and managing your income from the remaining pot to stay in lower tax brackets.

Yes, if you overpay tax on your pension, HMRC will typically refund it after reviewing your annual tax return or upon request.