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Tax relief for private pension contributions

18th September 2019
Source: HM Revenue & Customs | 18-09-2019

You can claim tax relief for your private pension contributions. The annual allowance for tax relief on pensions is £40,000 for the current tax year. There is also a facility to carry forward any unused amount of your annual allowance from the last three tax years if you have made pension savings in those years. There is also a lifetime limit for tax relief on pension contributions. The current lifetime limit is £1.03 million.

You can obtain tax relief on private pension contributions worth up to 100% of your annual earnings, subject to the overriding limits. Tax relief is allowed at your highest rate of Income Tax paid.

This means that if you are:

  • A basic rate taxpayer, you can claim 20% pension tax relief
  • A higher rate taxpayer, you can claim 40% pension tax relief
  • An additional rate taxpayer, you can claim 45% pension tax relief

The first 20% of tax relief is usually deducted by your employer, with no further action required if you are a basic-rate taxpayer. 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 is an interesting regional difference if you are based in Scotland. If you are a Scottish taxpayer paying Income Tax at the starter rate of 19%, you can still claim tax relief of 20% and are not required to pay back the difference. As with the rest of the UK, basic rate taxpayers in Scotland pay 20% Income Tax and qualify for 20% pension tax relief. There are also three higher rates, an intermediate rate of 21%, a higher rate of 41% and an additional rate of 46% where further tax relief can be claimed.

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