Under current rules, you can claim tax relief for your private pension contributions within certain limitations.
The current annual allowance for tax relief on pension contributions is £40,000. You can also carry forward any unused amount of your annual allowance from the last three tax years if you have made pension savings in those years.
Additionally, there is a lifetime limit for tax relief on pension contributions. The limit is currently £1,073,100.
You can qualify for 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 qualifies for 20% pension tax relief.
- A higher rate taxpayer qualifies for 40% pension tax relief.
- An additional rate taxpayer qualifies for 45% pension tax relief.
The first 20% of tax relief is usually applied by your employer with no further action required. 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 regional differences if you are based in Scotland.