Tax on your private pension contributions
Printable version
1. Overview
Your private pension contributions are tax-free up to certain limits.
This applies to most private pension schemes, for example:
- workplace pensions
- personal and stakeholder pensions
- overseas pension schemes that qualify for UK tax relief - ask your provider if it’s a ‘qualifying overseas pension scheme’
Pension schemes must be registered with HM Revenue and Customs (HMRC) to qualify for tax relief. Check with your pension provider if you’re unsure if your scheme is registered or not.
You pay tax when you take money out of a pension.
Limits to your tax-free contributions
You usually pay tax if savings in your pension pots go above:
- 100% of your earnings in a year - this is the limit on tax relief you get
- £60,000 a year - check your ‘annual allowance’
You also pay tax on contributions if your pension provider:
- is not registered for tax relief with HMRC
- does not invest your pension pot according to HMRC’s rules
2. Tax relief
You can get tax relief on private pension contributions worth up to 100% of your annual earnings.
You’ll either get the tax relief automatically, or you’ll have to claim it yourself. It depends on the type of pension scheme you’re in, and the rate of Income Tax you pay.
There are two kinds of pension schemes where you get relief automatically. Either:
- your employer takes workplace pension contributions out of your pay before deducting Income Tax
- your pension provider claims tax relief from the government at the basic 20% rate and adds it to your pension pot (‘relief at source’)
If your rate of Income Tax in Scotland is 19% your pension provider will claim tax relief for you at a rate of 20%. You do not need to pay the difference.
UK tax relief is also available on contributions made to certain types of overseas pension schemes.
It’s up to you to make sure you’re not getting tax relief on pension contributions worth more than 100% of your annual earnings. HM Revenue and Customs (HMRC) can ask you to pay back anything over this limit.
Relief at source
You get relief at source in all personal and stakeholder pensions, and some workplace pensions.
To get relief at source
Before paying into a scheme, you need to agree to certain conditions about your contributions (‘make declarations’). Your pension provider will tell you what these are.
You also need to give your pension provider your:
- full name and address
- date of birth
- National Insurance number
- employment status - or tell them if you’re retired, a full time student, a carer or aged under 16
Your employer may do this for you if you’re automatically enrolled in their pension scheme.
Your pension provider will let you know if this is the case and ask you to confirm your details are correct. You must do this within 30 days.
Claiming tax relief yourself
In some cases, you need to claim tax relief on pension contributions yourself. You’ll need to make a claim if:
- you pay Income Tax at a rate above 20% and your pension provider claims the first 20% for you (relief at source)
- your pension scheme is not set up for automatic tax relief
- someone else pays into your pension
If you’re paying in an amount greater than £10,000, you’ll need to contact HMRC to claim the tax relief.
If you pay Income Tax above 20% (England, Wales or Northern Ireland)
You can claim additional tax relief on your Self Assessment tax return for money you put into a private pension of:
- 20% up to the amount of any income you have paid 40% tax on
- 25% up to the amount of any income you have paid 45% tax on
You can also call or write to HMRC to claim if you pay Income Tax at 40%.
Example:
You earn £60,000 in the 2023 to 2024 tax year and pay 40% tax on £10,000. You put £15,000 into a private pension. You automatically get tax relief at source on the full £15,000.
You can claim an extra 20% tax relief on £10,000 (the same amount you paid higher rate tax on) through your Self Assessment tax return.
You do not get additional relief on the remaining £5,000 you put in your pension.
If you pay Income Tax above 20% (Scotland)
You can claim additional tax relief on your Self Assessment tax return for money you put into a private pension of:
- 1% up to the amount of any income you have paid 21% tax on
- 21% up to the amount of any income you have paid 41% tax on
- 26% up to the amount of any income you have paid 46% tax on
You can call or write to HMRC to claim if you do not fill in a Self Assessment tax return.
If your pension scheme is not set up for automatic tax relief
Claim tax relief in your Self Assessment tax return if your pension scheme is not set up for automatic tax relief.
Call or write to HMRC if you do not fill in a tax return.
You cannot claim tax relief if your pension scheme is not registered with HMRC.
If someone else pays into your pension
When someone else (for example your partner) pays into your pension, you automatically get tax relief at 20% if your pension provider claims it for you (relief at source).
If you’re in a workplace pension that allows other people to contribute you may need to claim the tax relief on those contributions - call or write to HMRC.
Submit or increase a claim over £10,000
You must write to HMRC to:
- make a new claim for a pension contribution over £10,000
- increase your current claim by more than 10% (if the current claim is already over £10,000)
If you’re increasing your current claim by less than 10%, you can tell HMRC over the phone.
In your letter, include:
- proof from your pension provider of payments made for each tax year you’re claiming for
- whether the payment amounts are before or after tax
Send the letter to the Pay As You Earn and Self Assessment team at HMRC.
Pay As You Earn and Self Assessment
HM Revenue and Customs
BX9 1AS
United Kingdom
If you do not pay Income Tax
You still automatically get tax relief at 20% on the first £2,880 you pay into a pension each tax year (6 April to 5 April) if both of the following apply to you:
- you do not pay Income Tax, for example because you’re on a low income
- your pension provider claims tax relief for you at a rate of 20% (relief at source)
Life insurance policies
You cannot get tax relief if you use your pension contributions to pay a personal term assurance policy, unless it’s a protected policy.
Personal term assurance is a life insurance policy that either:
- ends when the first insured person dies
- insures people who are all from the same family
3. Annual allowance
Your annual allowance is the most you can save in your pension pots in a tax year (6 April to 5 April) before you have to pay tax.
You’ll only pay tax if you go above the annual allowance. This is £60,000 this tax year.
What counts towards the annual allowance
Your annual allowance applies to all of your private pensions, if you have more than one. This includes:
- the total amount paid in to a defined contribution scheme in a tax year by you or anyone else (for example, your employer)
- any increase in a defined benefit scheme in a tax year
If you use all of your annual allowance for the current tax year
You might be able to carry over any annual allowance you did not use from the previous 3 tax years.
When your annual allowance is lower than £60,000
Your annual allowance might be lower if you have:
- flexibly accessed your pension pot
- a high income
If you flexibly access your pension
Your annual allowance might be lower if you flexibly access your pension. For example, this could include taking:
- cash or a short-term annuity from a flexi-access drawdown fund
- cash from a pension pot (‘uncrystallised funds pension lump sums’)
The lower allowance is called the ‘money purchase annual allowance’.
If you have a high income
You’ll have a reduced (‘tapered’) annual allowance in the current tax year if both:
- your ‘threshold income’ is over £200,000
- your ‘adjusted income’ is over £260,000
The threshold income and adjusted income limits are different for earlier tax years.
Work out your reduced annual allowance.
If you go above the annual allowance
You’ll get a statement from your pension provider telling you if you go above the annual allowance in their scheme. If you’re in more than one pension scheme, ask each pension provider for statements.
You can also use a calculator to work out how much you’ve gone above the allowance.
If you go over your annual allowance, either you or your pension provider must pay the tax.
Fill in the ‘Pension savings tax charges’ section of a Self Assessment tax return to tell HMRC about the tax, even if your pension provider pays all or part of it. You’ll need form SA101 if you’re using a paper form.
You can still claim tax relief for pension contributions on your Self Assessment tax return if you’re above the annual allowance.
HMRC does not tax anyone for going over their annual allowance in a tax year if they:
- retired and took all their pension pots because of serious ill health
- died
4. Lifetime allowance
The current lifetime allowance is £1,073,100.
The rate of the tax you pay on pension savings above the lifetime allowance depends on how the money is paid to you and when you took your pension savings.
If you took your pension before 6 April 2023, the rate is:
- 55% if you get it as a lump sum
- 25% if you get it any other way, for example pension payments or cash withdrawals
If you took your pension on or after 6 April 2023, there is no lifetime allowance charge. This applies if you took it as a lump sum or any other way, for example pension payments or cash withdrawals. Instead you’ll pay Income Tax on some or all of the lump sum. Your pension provider will take off the charge before you get your payment.
You might be able to protect your pension pot from reductions to the lifetime allowance.
Check how much lifetime allowance you’ve used
Ask your pension provider how much of your lifetime allowance you’ve used.
If you’re in more than one pension scheme, you must add up what you’ve used in all pension schemes you belong to.
What counts towards your allowance
It depends on the type of pension pot you get.
If you get a defined contribution, what counts is the money in pension pots that goes towards paying you, however you decide to take it.
If you get a defined benefit, what counts is usually 20 times the pension you get in the first year plus your lump sum - check with your pension provider.
Your pension provider may ask for information about other pension schemes you’re in so they can check if you’re above your lifetime allowance, and how much tax-free lump sum you can get when you:
- decide to take money from a pension pot
- turn 75
- transfer your pension overseas
Pay tax if you go above your lifetime allowance
You’ll get a statement from your pension provider telling you how much tax you owe if you go above your lifetime allowance. Your pension provider will deduct the tax before you start getting your pension.
You’ll need to report the tax deducted by filling in a Self Assessment tax return - download and fill in form SA101 if you’re using paper forms. You’ll get information from your pension provider to help you do this.
If you took your pension on or after 6 April 2023, there is no lifetime allowance tax charge and you do not need to report the tax deducted on your Self Assessment tax return.
If you die before taking your pension the pension provider will take tax from the person who inherits your pension.
Protect your lifetime allowance
The lifetime allowance was reduced in April 2016. You can apply to protect your lifetime allowance from this reduction.
If you hold lifetime allowance protection, this may increase the amount of tax-free lump sum you can take from your pensions.
Tell your pension provider the type of protection and the protection reference number when you decide to take money from your pension pot.
Withdrawing cash from a pension pot
You cannot withdraw cash from a defined contribution pension pot (‘uncrystallised funds pension lump sums’) if you have:
- primary or enhanced protection covering a lump sum worth more than £375,000
- ‘lifetime allowance enhancement factor’ if your unused lifetime allowance is less than 25% of the cash you want to withdraw
Find out more about how you can take your pension.
Reporting changes to HMRC
You can lose Enhanced protection or any type of Fixed protection if you do not meet certain conditions.
The conditions for losing your lifetime allowance protection depend on when HMRC received your application.
Tell HMRC in writing if you think you might have lost your protection.
If you have the right to take your pension before 50
You may have a reduced lifetime allowance if you have the right to take your pension before you’re 50 under a pension scheme you joined before 2006.
This only applies to people in certain jobs (for example professional sports, dance and modelling) who start taking their pension before they’re 55.
Your lifetime allowance is not reduced if you’re in a pension scheme for uniformed services, for example the armed forces, police and fire services.