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Claim tax relief on pension contributions

4 April 2024

You can usually claim 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.

Understanding pension contributions tax relief

Private pension contributions can usually claim tax relief up to 100% of your annual earnings, within overriding limits. The highest rate of income tax you pay determines the tax relief on your pension contributions.

 

Tax relief rates

If you’re a basic rate taxpayer, you receive 20% pension tax relief. As a higher rate taxpayer, you can claim 40% pension contributions tax relief. Additional rate taxpayers can claim 45% pension tax relief.

Your employer automatically applies the first 20% of tax relief if you’re a basic-rate taxpayer. No further action is required. If you’re a higher rate or additional rate taxpayer, you can claim any further reliefs on your self-assessment tax return.

These rules apply for claiming tax relief in England, Wales, or Northern Ireland. There are some regional differences if you’re based in Scotland.

Annual and lifetime allowances

The annual allowance for tax relief on pensions is £60,000. This limit remains unchanged in the new 2024-25 tax year. A rule allows you to carry forward any unused amount of your annual allowance for three tax years.

The lifetime limit for tax relief on pension contributions was abolished from 6 April 2023. This means there’s no upper limit on the amount of tax relief you can claim over your lifetime. This change provides more flexibility for individuals with larger pensions or those who wish to make significant contributions in a single year. Always consult with a tax professional if you’re unsure about any aspect of pension tax relief.

Source: HM Revenue & Customs Tue, 02 Apr 2024 00:00:00 +0100

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