Pension tax relief

Most UK taxpayers get tax relief on pension contributions, effectively meaning that the government adds money to your pension pot. Basic rate taxpayers get a 25% tax top up, meaning HMRC adds £25 for every £100 you pay into your pension.

Tax relief on UK pensions

When you’re thinking about how much money to save into your pension plan, it’s important to understand how pension tax relief works.

For 2018/19 you can get tax relief on pension contributions up to £40,000 or 100% of your salary (whichever is lower). Any contributions that you make over this limit are taxed at the highest rate of tax you pay.

Basic rate taxpayers get a 25% tax top up, so if you paid £100 into your pension, HMRC would effectively add another £25 which would bring the total contribution up to £125. PensionBee will claim this tax top up on your behalf if you’re paying into a PensionBee plan.

Higher rate taxpayers can claim a further 20% through their tax returns, and top rate taxpayers can claim an additional 25%. You can claim this tax back in three easy steps.

If you earn less than £3,600 annually or don’t earn anything, the maximum amount you can contribute to your pension within the tax threshold is £2,880, bringing your total annual contribution to £3,600 once tax relief is added.

New tapered tax relief allowance

A new tapered allowance has recently been introduced, which affects the pension tax relief limits for high earners. It basically means that if your adjusted income (your income plus pension contributions) is over £150,000, your annual pension tax relief limit is reduced, and the amount tapers all the way down to £10,000 for incomes of £210,000 or more.

This table shows how the tapered allowance works:

Earnings New annual allowance
Up to £150,000 £40,000
£160,000 £35,000
£170,000 £30,000
£180,000 £25,000
£190,000 £20,000
£200,000 £15,000
£210,000 + £10,000

Claiming tax relief with PensionBee

When you make personal contributions to your PensionBee pension, we’ll claim your 25% tax top up for you.

We’ll apply for tax relief on 15th of the month, on any contributions received by the 5th of the same month. HMRC will then usually pay this to us by the 21st of the next month, and your balance should be updated by the 28th of the month.

Example 1: For a contribution of £100 received on or before 05/10, tax relief will be requested on 15/10. We would expect to receive funds from HMRC on 21/11. Your balance should then be updated with your £20 around 28/11. (Total processing time of around 8 weeks)

Example 2: For a contribution of £100 received on or after 06/10, tax relief will be requested on 15/11. We would expect to receive funds from HMRC on 21/12. Your balance should then be updated with your £20 around 28/12. (Total processing time of around 12 weeks)

Please note that we are only able to apply for the standard 20% tax relief. If you are a higher-rate tax payer, you will need to claim any additional tax relief yourself through your self-assessment tax return.

Join PensionBee now and take control of your pension saving.

Last edited: 19-06-2018

Your pension in one place. PensionBee combines all your pensions into a single, good value online plan. Get started. Capital at Risk. Your pension in one place. PensionBee combines all your pensions into a single, good value online plan. Get started. Capital at Risk. Your pension in one place. PensionBee combines all your pensions into a single, good value online plan. Get started. Capital at Risk.

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PensionBee combines all your pensions into a single, good value online plan.

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