How to claim higher rate tax relief on pension contributions

Higher-rate taxpayers can reclaim an additional 20% tax on their pension contributions for a total of 40% tax relief.

This is one of the biggest benefits of saving into a pension – getting tax relief on everything you pay in.

But many higher-rate taxpayers don’t realise that this relief won’t happen automatically – you have to claim it.

What is higher rate tax relief on pension contributions?

Tax relief is the principle that all the income you pay into a pension scheme should be exempt from income tax.

As income tax is usually paid at source (via Pay as you Earn [PAYE] if you’re an employee), this money is repaid to you on every pension contribution you make.

Basic rate relief of 20% is automatically added to your pension contributions and paid directly into the fund.

If you are a higher or additional rate taxpayer, things are a little more complex.

You’ll be paying 40% or 45% tax on all your income over the set thresholds, so you can claim an extra 20% or 25% on this part of your income if you pay it into your pension.

However, you have to actively claim this money via your self-assessment tax return.

For example, your annual earnings are £80,000, so you pay the higher rate of 40% tax on £29,730 of this.

You put £35,000 into a private pension in that tax year. A basic rate tax relief of 20% is automatically applied to the whole amount.

You can claim an extra 20% tax relief on £29,730 (the amount you paid higher rate tax on) through your self-assessment return or by writing or calling HMRC.

There is no extra relief on the remaining £5,000 you put in your pension.

Learn more: what is the 60% tax trap and how can you legally avoid it?

How does higher rate tax relief help my pension?

The extra tax relief offered to higher rate taxpayers makes pension saving at this level up to twice as rewarding as saving on a basic-rate income.

Claiming all available tax reliefs is an important way of ensuring you are getting the most value out of your pension contributions.

In practical terms, making a pension contribution with higher-rate tax relief is like getting a boost of around 66% on the amount you pay in.

Why 66%, when higher-rate tax is only 40%? This is because of how percentages work.

For instance, if you pay 40% tax on £100 it is reduced to £60. But if you then pay that £60 into a pension, the income tax is repaid – making it up to £100 again. And £60 turned into £100 is an increase of (roughly) 66%.

So, in terms of value for money, higher-rate pension contributions really are hard to beat.

Talk to your employer about how they make pension contributions on your behalf, as under some systems (such as salary sacrifice) you may receive your tax relief in a different way.

A financial adviser can also help, if you have several options to consider about how to make your pension contributions.

How to claim higher rate tax relief on pension contributions: what are the options?

Unlike basic rate tax relief, you will need to actively claim higher rate tax relief on your pension contributions.

You can do this in two ways: through your self-assessment or by contacting HMRC directly.

To claim through your self-assessment, you will need to do so online. You should go to the relevant section of the online form and state the exact amount of your pension contributions.

This should be a gross calculation that includes your contributions and the basic rate tax relief of 20%. Not doing this is one of the most common mistakes people make.

Your relief will either be supplied as a rebate at the end of the year, a reduction in your tax liability or a change to your tax code.

You can also write to your HMRC tax office. You will be able to find the relevant address on your P60 or payslip, and the letter should outline exactly how much you have paid.

You will also need to provide personal details so that you can receive the tax relief. Bear in mind that you will need to submit a new letter every time you alter your pension contributions or your salary changes.

Can I claim tax relief on pension contributions for previous years?

You can make backdated claims for higher rate tax relief on your pension contributions, but there is a time limit.

You can only claim back any tax relief for the last four tax years.

If you have only been a higher rate taxpayer for a short period, it should be simple to claim back some of the missing tax relief.

What are the limits on pension tax relief? 

There is a cap on the level of tax relief you can receive.

Your annual allowance (or the highest amount you can put into your pension each year) is currently £60,000 or 100% of your qualifying earnings. This means you can only receive tax relief on this amount.

In addition, there was a lifetime allowance, which meant you could draw a maximum of £1,073,100 from your pension without incurring additional charges. However, this charge was stopped on 6 April 2023 and abolished on 6 April 2024.

You can use our pension calculator to help you stay on top of your pension savings.

Can other people pay into my pension, and what tax relief do I get? 

It is not only you and your employer that can contribute to your pension pot.

Other people can also make pension contributions on your behalf, and you will receive tax relief on these, too.

In these instances, you would still receive basic tax relief automatically and would still need to claim the higher rate of tax relief on the gross contribution based on your circumstances.

The third party is not entitled to any tax relief on their contribution – it is counted as if you had made the contribution yourself.

Can I claim additional rate tax relief? 

If your taxable income is over £125,140, you’ll pay a tax rate of 45% on everything over this threshold.

This means you can claim additional tax relief on that amount – an extra 25%, to give you 45% tax relief in total on all contributions from your income over this threshold. Again, you’ll have to claim it back via your self-assessment or contact HMRC.

Talk to a financial adviser or accountant about maximising the value of your pension through tax relief.

Get expert financial advice

Understanding how to claim higher rate tax relief on pension contributions can significantly boost your retirement savings.

By actively managing your contributions and taking advantage of available tax relief, you can enhance the value of your pension pot and make the most of your savings strategy. Stay informed about the rules and limits to ensure you’re maximising your benefits and securing a more comfortable retirement.

Let Unbiased match you with a financial adviser for expert financial advice on maximising your pension contributions.

If you found this article helpful, you might also find our free pension guide and article on how to find a lost pension informative, too.