If you’re a higher rate taxpayer in the UK, you could be missing out on additional tax relief for your pension contributions. The process to claim higher rate tax relief is not automatic, but it can be done relatively easily. This guide will explain how to claim this extra 20% tax relief, which can significantly boost your pension contributions and reduce your overall tax burden.
When Do You Need to Claim Pension Tax Relief?
Higher rate taxpayers need to actively claim additional tax relief on their pension contributions. This is particularly the case if your pension scheme doesn’t automatically process the extra relief, or if someone else is contributing to your pension on your behalf.
There are two main ways pension tax relief can be applied:
1. Net Pay Scheme
In a net pay arrangement, your pension contributions are deducted from your salary before income tax is calculated, meaning you’re taxed on the amount left after your contributions. There’s no need for you to claim tax relief yourself, as your pension provider does this automatically. Most workplace pensions use this scheme.
2. Relief at Source
With relief at source, your pension provider or employer only claims a 20% tax relief, meaning higher rate taxpayers must claim the additional 20%. This type of arrangement is common with personal pensions, such as Self-Invested Personal Pensions (SIPPs) or stakeholder pensions.
If you’re in a pension scheme using relief at source, you’ll need to claim the higher rate relief. Some workplace pensions may also require you to claim, so it’s important to check with your provider or employer.
Methods to Claim Your Pension Tax Relief
There are two ways to claim higher rate tax relief on pension contributions:
1. HMRC Online Tool
Introduced in February 2025, this tool makes claiming tax relief much easier. All you need is a Government Gateway account, or you can create one if you don’t have one. The process is simple: log in, provide the necessary information, and you can even save your progress as you go.
2. Self-Assessment Tax Return
If you’re already filing a self-assessment tax return, you can claim higher rate tax relief by filling out the “tax reliefs” section. It’s important to remember that you must include the initial 20% basic rate relief in your calculation—this is a common mistake to avoid.
You can also claim by post, but this method is generally used only if you cannot claim online or if you have an agent filing on your behalf.
How Does Higher Rate Tax Relief Work?
If you’re a higher rate taxpayer, you can claim additional relief on your pension contributions. For example, if you contribute to a pension and fall within the higher rate tax bracket, you can claim an extra 20% tax relief on the part of your contribution that corresponds to your higher-rate earnings.
This means you can receive up to 40% tax relief on your pension contributions, with 20% already applied automatically, and an additional 20% added when you claim. For example, if you contribute £10,000 to your pension, it could effectively only cost you £6,000 after tax relief is applied.
However, there are limits. The tax relief is capped at 100% of your annual earnings or the annual pension allowance, which is £60,000 for the 2025/26 tax year. This total includes contributions made by you, your employer, and anyone else contributing to your pension. If you exceed this allowance, HMRC will reclaim the extra relief.
For defined benefits pensions, such as final salary pensions, the annual allowance is based on how much your pension benefits increase, not the amount contributed.
Conclusion
Claiming higher rate tax relief on pension contributions can significantly increase the value of your retirement savings, but it’s important to understand how the process works and when you need to take action. Whether through an online tool or your self-assessment tax return, claiming the extra relief is straightforward, and it could make a big difference to your financial future.
