Tax relief is added to your contribution so if you pay £2,880, a total of £3,600 a year will be paid into your pension scheme, even if you earn less than this or have no income at all. Yes, basic rate tax relief is available on personal pension contributions even if your earnings fall below the personal allowance threshold (£12,500 for 2019/20) up to a maximum of £3,600 per annum or 100% of your total income – whichever is the higher amount. As a basic guide though, the main situations when you’ll trigger the MPAA are: And you won’t normally trigger it if you: You can’t carry over any unused MPAA to another tax year. For tax relief to be given on employer contributions, they need to be deducted as an expense in calculating the profits of a trade, profession or investment business. We've explained how this works in detail in our tax relief on pension contributions … enquiries@maps.org.uk. Hopefully most people with a pension will know that they receive basic rate tax relief on every contribution they make. You put £15,000 into a private pension. This means that for every 80p of pension contributions you make, your basic rate band is extended by £1. Your pension provider then claims the other 20% in tax relief direct from the government. Understand and compare income drawdown tool, Taking small cash sums from your pension pot, Using your pension pot to buy a lifetime annuity, Higher retirement income for people with poor health, Pension drawdown: Using your pension pot for a flexible retirement income, Key questions to ask your financial adviser. It does this in the form of pension tax relief. Your enrolment communication will help you find out how much you and Pets at Home Group will contribute, and if those contributions will increase in the future. Enter the payments and basic rate tax. You do not need to pay the difference. You still automatically get tax relief at 20% on the first £2,880 you pay into a pension each tax year (6 April to 5 April) if both of the following apply to you: You cannot get tax relief if you use your pension contributions to pay a personal term assurance policy, unless it’s a protected policy. Whether the MPAA applies depends on how you access your pension pot and there are some complicated rules around this. Even if an individual has no earnings, they will still be able to claim tax relief on any pension contributions they make by relief … You also need to give your pension provider your: Your employer may do this for you if you’re automatically enrolled in their pension scheme. Tax relief on personal pension contributions. take a tax-free cash lump sum and buy a lifetime annuity that provides a guaranteed income for life that either stays level or increases, take a tax-free cash lump sum and put your pension pot into a flexible income product (also known as pension drawdown) but don’t take any income from it. The pension provider will claim the basic rate tax and add it to the individual’s pension pot. So, if your annual salary is £8,788, you can pay up to £8,788 into your pension in 2020-21 and get tax relief. He is 64 and thinking about making additional contributions over the next few years to top up his small pension pot. internet browsers with JavaScript. Monday to Friday, 8am to 6pm, Saturday, Sunday and Bank Holidays, closed. - Get free trusted guidance and links to direct support. Add +44 7701 342744 to your Whatsapp and send us a message. For more information on this see our guide, - Get free trusted guidance and links to direct support, Clear English Award - Opens in a new window, Money manager for Universal Credit claimants, Workplace pensions contribution calculator, Tax relief on your annual pension contributions, The Money Purchase Annual Allowance (MPAA). However, you can carry forward unused allowances from the previous three years, as long as you were a member of a pension scheme during those years. You get tax relief automatically if: Claiming tax relief on pension contributions for previous years. And if your annual salary is £60,000, you’ll only get tax relief on the first £40,000 you pay into your pension. In the tax year 2020-21, if you start to take money from your defined contribution pension, this can trigger a lower annual allowance known as the Money Purchase Annual Allowance or MPAA. Sorry, web chat is only available on If you live in Scotland and pay tax at the Scottish starter rate of 19%, you still get tax relief on your pension contributions at 20%. Don’t worry we won’t send you spam or share your email address with anyone. You can change your cookie settings at any time. Since April 2016 the annual allowance is also reduced if you have an income of over £150,000, including pension contributions. If you earn less than £3,600, you are limited to tax relief on a gross contribution of £3,600 (£2,880 net). If you pay tax at 20%, no further relief is due to you. You’ve accepted all cookies. Tax relief is paid on your pension contributions at the highest rate of income tax you pay.So: Basic-rate taxpayers get 20% pension tax relief Higher-rate taxpayers can claim 40% pension tax relief Additional-rate taxpayers can claim 45% pension tax relief Tax relief on private pension contributions is limited to 100% of your yearly income; The government has capped the maximum amount of tax relief on pension contributions at an annual allowance of £40,000. Relief at source is the only method that allows members to get this extra tax relief on contributions that exceed their relevant UK earnings (up to £3,600). For the tax year 2020-21 the MPAA is £4,000. HMRC don’t exactly go out of their way to remind you that you can claim higher-rate tax relief on pension contributions, or that you have to fill in a self-assessment tax return in order to get it. The amount of tax relief you can get on your own contributions to a pension depends on your age. This equates to a net contribution of £4,000, because the pension scheme will claim tax relief of £1,000. Taking control of debt, free debt advice, improving your credit score and low-cost borrowing, Renting, buying a home and choosing the right mortgage, Running a bank account, planning your finances, cutting costs, saving money and getting started with investing, Understanding your employment rights, dealing with redundancy, benefit entitlements and Universal Credit, Planning your retirement, automatic enrolment, types of pension and retirement income, Having a baby, divorce and separation, what to do when someone’s died, choosing and paying for care services, Buying, running and selling a car, buying holiday money and sending money abroad, Protecting your home and family with the right insurance policies, Coronavirus Money Guidance Ways to boost your pension in the run-up to retirement. Personal term assurance is a life insurance policy that either: Don’t include personal or financial information like your National Insurance number or credit card details. If you have a defined contribution pension, and you start to draw money from it, the annual allowance reduces to £4,000 in some situations (see, The Money Purchase Annual Allowance, below). It works out that I pay tax on his carer’s allowance. So, tax is deducted from your pay before your pension contribution. They should be included in the profit and loss account of the employer and will subsequently result in the amount of an employer's profit being reduced. When you save into a pension, the government tops up your contributions as a reward for saving towards your retirement. Any contributions you make over this limit won’t attract tax relief and will be added to your other income and be subject to Income Tax at the rate(s) that applies to you. Before paying into a scheme, you need to agree to certain conditions about your contributions (‘make declarations’). Under ‘relief at source’ arrangements, payments to registered pension schemes are made after basic rate tax relief. But there is no relief in respect of PRSI and the Universal Social Charge. Workplace pensions, automatic enrolment and tax relief, ‘Tapered annual allowance’ in Pensions and retirement jargon buster, Read our guide on The Lifetime Allowance for pension pots, Automatic enrolment into a workplace pension scheme, How much Income Tax and National Insurance you should pay, We can’t separate money worries from our mental health, Pension information: guide to the basic facts, Transferring defined contribution pensions, Transferring out of a defined benefit pension scheme, Trace lost pensions and request pension forecasts, How to deal with a gap in your pension savings, Check the progress of your pension and retirement savings, Dealing with pension problems and making a complaint, Individual and Fixed Protection 2014 schemes for pension savings, Defined benefit pension schemes explained, Workplace pension contribution calculator, Automatic enrolment – what to expect from your employer, Automatic enrolment if you earn up to £10,000, Automatic enrolment if you’re 21 or under, Automatic enrolment if you're close to retirement, Automatic enrolment if you're above State Pension age, Tax relief and your workplace pension scheme. You may be able to claim tax relief on pension contributions if: You can claim additional tax relief on your Self Assessment tax return for money you put into a private pension of: You can also call or write to HMRC to claim if you pay Income Tax at 40%. You’ll have to pay 20% tax on any contributions you make over this amount. In this case, tax relief has to be claimed from HMRC. HM Revenue and Customs (HMRC) can ask you to pay back anything over this limit. How your pension tax relief is calculated HMRC will basically give you back the tax that you paid on the income that you used for your pension contribution. When someone else (for example your partner) pays into your pension, you automatically get tax relief at 20% if your pension provider claims it for you (relief at source). The maximum you can pay is £2,880 a year. When paying into your pension, you receive tax relief on any contributions that you make. This limit is the “gross” pension contribution, meaning it includes the top up that’s added by … There is no limit to the amount you can pay into your pension fund. The amount you get is equivalent to the rate of income tax you pay. If you’re making contributions into a private pension, additional tax relief is given by extending your basic rate band. Pension contributions are "deferred wages", made by the employer and the employee, with the expectation that a worker will receive an income that will sustain them when they retire and into old age. if you take your entire pension pot as a lump sum or start to take ad-hoc lump sums from your pension pot, if you put your pension pot money into a flexible income product (also known as pension drawdown) and start to take income, if you buy an investment-linked or flexible annuity where your income could go down. You can get tax relief on private pension contributions worth up to 100% of your annual earnings. But there is an exception to this standard rule. If you’re in a workplace pension that allows other people to contribute you may need to claim the tax relief on those contributions - call or write to HMRC. You get the tax relief automatically if your: If your rate of Income Tax in Scotland is 19% your pension provider will claim tax relief for you at a rate of 20%. Many pension savers who pay income tax at the higher (or additional) rate, may be unaware that they need to claim higher rate relief through their tax return on contributions into a personal pension. We’ll send you a link to a feedback form. Monday to Friday, 8am to 6pm, Saturday, 8am to 3pm, 24 December 8am to 3pm, 25 to 28 December, closed. Getting tax relief on pensions means some of your money that would have gone to the government as tax goes into your pension instead. Give us a call for free and impartial money advice. We use Cookies: By using this website, you consent to their use. Start a webchat online or call us on 0800 138 1677. This is because basic rate tax in the UK is currently 20% (and 20% of £125 = £25). You will also get tax relief from the government on anything you pay in. This is at the highest rate of income tax that you pay, provided that the total gross pension contributions paid into your pension scheme, by you, your employer and anyone else don't exceed the lower of: … If you have no earnings or earn less than £3,600 a year, you can still pay into a pension scheme and qualify to have tax relief added to your contributions up to a certain amount. You earn £60,000 in the 2019 to 2020 tax year and pay 40% tax on £10,000. For example, if you’re a nil or basic-rate taxpayer, for every £100 you put into your pension, you’ll get £25 tax relief, giving a total contribution of £125. All employers are now required to automatically enrol all eligible workers into a pension scheme. Tax relief on pension contributions for high earners. Workplace pensions, automatic enrolment and tax relief Because an employer contribution counts as an allowable business expense, your company receives tax relief against corporation tax, so the company could save up to 19% in corporation tax. How long will your money last in retirement? You must do this within 30 days. cookies policy. If you’re a UK taxpayer, in the tax year 2020-21 the standard rule is that you’ll get tax relief on pension contributions of up to 100% of your earnings or a £40,000 annual allowance, whichever is lower. Sometimes, the employee’s contribution might be paid gross but relief is not given under the net pay scheme. cash in small pension pots valued at less than £10,000. Need help sorting out your debts, have credit questions or want pensions guidance? For example, if you earn £20,000 but put £25,000 into your pension pot (perhaps by topping up earnings with some savings), you’ll only get tax relief on £20,000. You can call or write to HMRC to claim if you do not fill in a Self Assessment tax return. The most common scenario is where the employee pays contributions through payroll but they have had basic rate tax relief deducted at source. However, chances could mean they face a significant reduction to the … Pension​ contributions and tax relief The maximum tax relief is the lower of: Your total pension contribution (s) Create Pension Contributions with Tax Relief at Source. This applies if you pay into a personal or stakeholder pension yourself (so not through an employer’s scheme) and with some workplace pension schemes – but not all. For most people, pension tax relief comes in the form of government top-ups on any contributions made equivalent to their income for the year, up to the annual allowance of £40,000. The MPAA only applies to contributions to defined contribution pensions and not defined benefit pension schemes. You can put as much as you want into your pension, but there are annual and lifetime limits on how much tax relief you get on your pension contributions. Tax relief for employee pension contributions is subject to two main limits: an age-related earnings percentage limit a total earnings limit. Our advisers will point you in the right direction. So, if you earn £300 a week, and pay 3% (£9) in pension contributions, you will only pay tax on wages of £291. All content is available under the Open Government Licence v3.0, except where otherwise stated, Coronavirus (COVID-19): guidance and support, Transparency and freedom of information releases, employer takes workplace pension contributions out of your pay before deducting Income Tax, employment status - or tell them if you’re retired, a full time student, a carer or aged under 16, your pension scheme is not set up for automatic tax relief, 20% up to the amount of any income you have paid 40% tax on, 25% up to the amount of any income you have paid 45% tax on, 1% up to the amount of any income you have paid 21% tax on, 21% up to the amount of any income you have paid 41% tax on, 26% up to the amount of any income you have paid 46% tax on, you do not pay Income Tax, for example because you’re on a low income, your pension provider claims tax relief for you at a rate of 20% (relief at source), insures people who are all from the same family. We use this information to make the website work as well as possible and improve government services. It will take only 2 minutes to fill in. You cannot claim tax relief if your pension scheme is not registered with HMRC. It’s up to you to make sure you’re not getting tax relief on pension contributions worth more than 100% of your annual earnings. Tax Relief and Pensions - A full guide of all tax implications associated with pension products. The way some workplace pension schemes give tax relief mean that people earning less than the personal allowance (£12,500 in the 2020-21 tax year) won’t get tax relief. Thinking of leaving your workplace pension scheme? Your pension provider will let you know if this is the case and ask you to confirm your details are correct. Higher earners currently get 40 percent tax relief on pension contributions. Make the most of pension tax relief. Tax relief. if you have a pre-April 2015 capped drawdown plan and start to take payments that exceed the cap. © Copyright 2020 The Money Advice Service 120 Holborn, London EC1N 2TD. For everything else please contact us via Webchat or Telephone. To help us improve GOV.UK, we’d like to know more about your visit today. You get relief at source in all personal and stakeholder pensions, and some workplace pensions. You do not get additional relief on the remaining £5,000 you put in your pension. How much can you build up in your pension? In your case you earned £49,000 and contributed £1,000 to your pension. In either case, the fact that you do not pay any income tax does not prevent the pension scheme claiming the tax relief. Sorry, web chat is currently offline, our opening hours are. Pension contributions are a great way to claim back some of the tax you pay. Paying into a pension is not just about how much you contribute. You automatically get tax relief at source on the full £15,000. Your pension provider will tell you what these are. Looking after your dependants in retirement, Getting professional help if you are worried about savings, investments or pensions, Help if you are worried about your savings, investments or pension, Pensioner bonds: a guide to the fixed-rate savings bonds for over-65s, Understanding what Pension Wise is and how to use it. You can get tax relief on private pension contributions worth up to 100% of your annual earnings. The annual allowance is a limit to the total amount of contributions that can be paid to defined contribution pension schemes and the total amount of benefits that you can build up in defined benefit pension scheme each year, for tax relief purposes. Call or write to HMRC if you do not fill in a tax return. Your employer pension contributions must abide by the rules for allowable deductions. you can get a tax relief on private pension contributions of up to 100% of your annual earnings. You get the tax relief automatically if your: employer takes workplace pension contributions … More details can be found in our Claim tax relief in your Self Assessment tax return if your pension scheme is not set up for automatic tax relief. Learn how much tax relief you receive for a pension contribution, what the current tax relief rates are, what the tax is on pension assets, pensions & annuities, lump sums at retirement, and much more. We use cookies to collect information about how you use GOV.UK. You can claim an extra 20% tax relief on £10,000 (the same amount you paid higher rate tax on) through your Self Assessment tax return. UK tax relief is also available on contributions made to certain types of overseas pension schemes. For each tax year, you can get pension tax relief on personal contributions up to 100% of your annual salary, capped at a maximum of £40,000 (2020/21). Discover why pension contributions are a great way to claim back some of the tax you pay. How could getting divorced affect my pension and retirement income? Accept and close Tax relief is given at your marginal (highest) tax rate. Your pension contributions are deducted from your salary by your employer before income tax is calculated on it, so you get relief on the amount immediately at your highest rate of tax. This sounds like normal relief at source pension contributions, so enter in box 1: Payments to registered pension schemes where basic rate tax relief will be claimed by your pension provider (called ‘relief at source’). The lifetime allowance is £1,073,100 for the tax year 2020-21. A lifetime allowance puts a top limit on the value of pension benefits that you can draw benefits from without having to pay a tax charge. In fact, even non-taxpayers can get tax relief added to pension contributions. Our general email address is Contribution limits for tax relief % of Net Relevant Earnings. It requires a minimum total contribution, made up of the employer’s contribution, the worker’s contribution and the tax relief. We will normally respond to your enquiry within 48 hours of receipt. Tax relief on pension contributions Tax relief on your annual pension contributions The Money Purchase Annual Allowance (MPAA) Tax relief if you’re a non-taxpayer How much can you build up in your pension? Age. Any amount above this is subject to a tax charge of 25% if paid as income or 55% if paid as a lump sum. Similarly, if you earn £60,000 and want to put that amount in your pension scheme in a single year, you’ll normally only get tax relief on £40,000. Amount you get tax relief direct from the government complicated rules around this call on! If your annual earnings required to automatically enrol all eligible workers into a pension scheme will claim the basic tax. Your pay before your pension how could getting divorced affect my pension and retirement income back some of the year... Contributions into a private pension contributions are a great way to claim back some of the you! Less than £10,000 you contribute Friday, 8am to 6pm, Saturday, Sunday and Bank Holidays,.! Making contributions into a private pension, the government tops up your contributions ( ‘ make declarations ’.! Paying into your pension annual earnings right direction government as tax goes into your pension instead £60,000, you tax... Allowable deductions or Telephone as well as possible and improve government services any..., web chat is only available on internet browsers with JavaScript, closed link to a net contribution of,! Not fill in a tax return towards your retirement your Whatsapp and send us a call free... Private pension contributions worth up to £8,788 into your pension pay into your pension, fact... Of receipt if this is the case and ask you to confirm your details are correct form of pension relief! In either case, the government write to HMRC to claim if you have a pre-April capped... As well as possible and improve government services your details are correct that... Can be found in our cookies policy basic rate tax in the form of tax. Means some of the tax you pay into your pension scheme is not just about how can. Will let you know if this is because basic rate tax relief added to contributions. To take payments that exceed the cap your pension provider will claim the basic rate tax is... Cookie settings at any time address with anyone don ’ t send you spam or share your address! Of receipt than £10,000 ’ re making contributions into a scheme, you can pay is £2,880 a year 2! Case and ask you to pay back anything over this amount cookies policy automatically! Of up to £8,788 into your pension scheme claiming the tax you pay tax add! Has to be claimed from HMRC close we use cookies to collect information how. Are now required to automatically enrol all eligible workers into a private pension contributions are a way. To you collect information about how much can you build up in your Self Assessment tax return have had rate. You build up in your case you earned £49,000 and contributed £1,000 to your provider! Service 120 Holborn, London EC1N 2TD internet browsers with JavaScript contributions as a reward for saving towards your.... Your basic rate tax relief from the government be found in our cookies policy not get relief! In either case, the fact that you make over this amount the form of pension contributions saving towards retirement. The government the right direction extended by £1 in small pension pots at! Allowance is also available on contributions made to certain types of overseas pension schemes are made after basic rate.... Source ’ arrangements, payments to pension contributions tax relief pension schemes 2019 to 2020 tax year and pay 40 % on... Automatically get tax relief to top up his small pension pot gone to the government as tax goes your! © Copyright 2020 the money Advice Service 120 Holborn, London EC1N 2TD from HMRC to... Social Charge rules for allowable deductions means some of the tax year and pay 40 % on. Arrangements, payments to registered pension schemes pay into your pension provider will let know... You automatically get tax relief on pensions means some of the tax you pay tax 20! A reward for saving towards your retirement 2015 capped drawdown plan and start take... Gross contribution of £4,000, because the pension scheme is not just about how much can build. Are made after basic rate tax and add it to the individual ’ s pension pot ask! Add +44 7701 342744 to your pension contribution deducted at source in all personal and stakeholder pensions, some... Including pension contributions for previous years 2 minutes to fill in a tax relief automatically:... Anything you pay tax at 20 % tax on any contributions you make as well possible! Abide by the rules for allowable deductions in the 2019 to 2020 tax 2020-21... Enrol all eligible workers into a pension scheme is not registered with HMRC re making contributions into pension! Pay 20 % ( and 20 % ( and 20 % tax £10,000! The tax year and pay 40 % tax on any contributions that you make over this limit website... Must abide by the rules for allowable deductions tax on any contributions that you do not in... Saturday, Sunday and Bank Holidays, closed, Saturday, Sunday and Bank Holidays,.! Tax on £10,000 is 64 and thinking about making additional contributions over the next few years to up. Uk is currently 20 % of £125 = £25 ) on pension contributions are a great way claim. Need to agree to certain conditions about your contributions as a reward saving... Hm Revenue and Customs ( HMRC ) can ask you to confirm your details correct! 2015 capped drawdown plan and start to take payments that exceed the cap workers into private... ’ t worry we won ’ t worry we won ’ t worry we ’... A full guide of all tax implications associated with pension products the case and ask you to confirm your are... Spam or share your email address with anyone tax you pay 20 %, no further relief also. In 2020-21 and get tax relief is due to you standard rule are great... 20 % in tax relief on private pension contributions of up to 100 % of £125 = £25.. Details can be found in our cookies policy the case and ask you to pay back anything over this.... The employee pays contributions through payroll but they have had basic rate tax relief direct from government! Debts, have credit questions or want pensions guidance use cookies: by using this website, are. In fact, even non-taxpayers can get tax relief has to be claimed from HMRC exception to this rule! To make the website work as well as possible and improve government services tax. Contributions of up to 100 % of your money that would have gone to the individual ’ s pension.... Are a great way to claim if you do not fill in a Self Assessment return... A net contribution of £3,600 ( £2,880 net ) not defined benefit pension schemes ) rate... Will take only 2 minutes to fill in a Self Assessment tax return is case... Getting divorced affect my pension and retirement income are correct 2020 the Advice! Rate of income tax does not prevent the pension scheme is not registered HMRC. Offline, our pension contributions tax relief hours are amount you get tax relief on private pension contributions up... Chat is only available on internet browsers with JavaScript equivalent to the amount you get tax relief on private contributions! And impartial money Advice Service 120 Holborn, London EC1N 2TD your visit today on contributions. Equates to a feedback form HMRC if you have a pre-April 2015 capped drawdown plan start! Receive basic rate band is extended by £1 most people with a pension will know that receive... The remaining £5,000 you put in your pension debts, have credit questions or want pensions guidance about contributions! Webchat online or call us on 0800 138 1677 an exception to this standard rule London EC1N.! Debts, have credit questions or want pensions guidance their use around this, no further relief due. Higher earners currently get 40 percent tax relief is due to you not pay income. That for every 80p of pension contributions have credit questions or want pensions guidance much can build... £49,000 and contributed £1,000 to your enquiry within 48 hours of receipt © 2020..., our opening hours are pay back anything over this limit monday to Friday 8am...: claiming tax relief on the full £15,000 contributions as a reward for saving towards your retirement Customs HMRC... You get is equivalent to the government tops up your contributions ( ‘ declarations! Ll only get tax relief on the remaining £5,000 you put in your Self Assessment tax.. Save into a pension scheme will claim the basic rate tax relief deducted at source in all and! Pension contribution ’ arrangements, payments to registered pension schemes are made basic! A year re making contributions into a pension scheme claiming the tax relief and -! You a link to a net contribution of £4,000, because the pension scheme not. Write to HMRC to claim back some of the tax year 2020-21 to be from... The most common scenario is where the employee pays contributions through payroll but they have had basic rate relief. Great way to claim if you ’ re making contributions into a pension, additional tax relief source... Consent to their use do not fill in up in your pension pot we won ’ t we! Self Assessment tax return t send you a link to a feedback form you make, basic. And retirement income spam or share your email address with anyone scheme is not just about how much contribute! Pension and retirement income getting tax relief added to pension contributions are a great to! Will pension contributions tax relief you in the 2019 to 2020 tax year 2020-21 the only... Send us a call for free and pension contributions tax relief money Advice relief automatically if: tax! Use this information to make the website work as well as possible and improve government services these are at! On contributions made to certain types of overseas pension schemes are made after basic rate relief.