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How does pension tax relief work?
How does pension tax relief work?

How the government encourages saving for your pension.

Updated over a week ago

When you make personal contributions to a pension, you’ll be entitled to tax relief from the government. This is in-line with your income tax bracket, starting at 20%.

If you are a Higher-rate, or Additional-rate taxpayer, you can claim further tax relief on personal contributions via your self assessment return.

You may be able to operate a salary sacrifice scheme, whereby tax relief on your pension contributions is claimed “at source” by deducting the amount form your gross pay. You should speak to your accountant, or tax adviser about this.

If you make contributions from your limited company, you won’t receive tax relief because you’re saving the money ‘pre-tax’. However, company contributions are tax deductible. If you typically pay corporation tax at 19%, this is a significant saving on your tax bill.

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