Can I Claim Higher Rate Relief If I Already Used a Salary Sacrifice Scheme

How salary sacrifice pension schemes work

In a salary sacrifice pension scheme, an employee agrees to give up part of their gross salary, and the employer contributes that amount directly into the employee’s pension.

Because the contribution comes from the employer, it is not treated as income for tax or National Insurance purposes. Both the employee and employer therefore save money:

The employee pays less tax and National Insurance.

The employer pays less employer National Insurance.

For example, if you earn £60,000 and sacrifice £5,000 into your pension, your taxable income reduces to £55,000. You pay income tax only on £55,000, which means the tax saving happens automatically.

This mechanism is different from making a personal pension contribution, where you pay tax first and then claim the extra relief separately.

Why higher rate taxpayers usually ask about this

Higher rate taxpayers (those earning over £50,270 in 2025 26) are entitled to 40% tax relief on pension contributions. With personal pensions or workplace “net pay” arrangements, they normally claim part of this relief through their tax return or HMRC adjustment.

However, salary sacrifice schemes operate differently. Because the contribution is taken from pre-tax income, full tax relief is applied automatically at your marginal rate. There is no additional relief to claim later.

In simple terms, salary sacrifice ensures that you never pay tax on the sacrificed portion of your salary in the first place.

The difference between salary sacrifice and personal contributions

To understand why higher rate relief cannot be claimed on top of salary sacrifice, it helps to compare how the two systems handle tax:

Salary sacrifice:

Your gross salary is reduced before tax and NI are calculated.

The employer pays the sacrificed amount straight into your pension.

You automatically receive tax relief at your full marginal rate (20%, 40% or 45%).

Personal contribution (relief at source):

You pay into your pension from your net income after tax.

The provider adds 20% basic rate relief.

Higher rate taxpayers can claim the remaining 20% (or 25% for additional rate) through their Self Assessment tax return.

So if you already use salary sacrifice, you’ve already received higher rate relief through the reduction in taxable pay. Claiming again would effectively double the tax advantage, which HMRC does not allow.

Example: comparing both approaches

Let’s look at two employees, both earning £70,000 per year and contributing £10,000 to their pensions.

Employee A: salary sacrifice scheme

Gross pay after sacrifice: £60,000.

Pays tax on £60,000 instead of £70,000.

Tax saving: £4,000 (40% of £10,000).

No further claim required.

Employee B: personal pension contribution

Pays £8,000 from take-home pay.

Pension provider adds £2,000 basic rate relief (total £10,000).

Employee claims extra 20% relief (£2,000) via Self Assessment.

Both end up with the same tax relief, but the process differs. Employee A never paid the tax in the first place, while Employee B paid it and reclaimed it later.

National Insurance savings through salary sacrifice

One major advantage of salary sacrifice is that it also reduces National Insurance contributions.

The employee pays NI only on their reduced salary.

The employer saves on their NI bill too (13.8% on the sacrificed amount).

Some employers even pass part of their NI saving back into the employee’s pension, increasing the total contribution. This extra benefit makes salary sacrifice one of the most efficient ways to save for retirement, particularly for higher earners.

When higher rate taxpayers might still need to claim relief

There are a few limited scenarios where higher rate taxpayers using salary sacrifice may still need to interact with HMRC:

If you make additional personal pension contributions outside your salary sacrifice scheme (for example, to a private SIPP), you may need to claim higher rate relief on those separate contributions.

If your employer uses a net pay arrangement rather than salary sacrifice, the relief may be applied differently, and HMRC may need to adjust your tax code.

If your income fluctuates, you may cross in and out of the higher rate band during the year, which can affect your tax position and require reconciliation through Self Assessment.

For pure salary sacrifice contributions, however, no claim for higher rate relief is needed.

How to check if your scheme uses salary sacrifice

Not every workplace pension uses salary sacrifice. To confirm, check your payslip or ask your HR or payroll department. Signs that you’re in a salary sacrifice scheme include:

Your contractual gross pay is shown as lower than before joining the pension scheme.

The pension contribution appears as an employer contribution rather than an employee deduction.

Your total taxable pay on the payslip is lower than your full salary.

If these points apply, your scheme likely operates through salary sacrifice, and tax relief is already built in.

Annual allowance and reporting considerations

Regardless of how you contribute, all pension savings count toward your annual allowance, which is £60,000 for the 2025 26 tax year (or lower if the tapered allowance applies).

Salary sacrifice contributions count as employer contributions for this limit. If your combined contributions exceed the allowance, you may face an annual allowance charge, which must be reported on your Self Assessment tax return.

However, this has nothing to do with claiming higher rate relief; it simply ensures you do not exceed the maximum tax-advantaged savings allowed each year.

Common misconceptions

“I can claim more tax relief because I’m a higher rate taxpayer.”
No. The higher rate relief is already factored in automatically through reduced taxable income.

“HMRC owes me a refund for pension contributions.”
Not if those contributions were made via salary sacrifice. There is no refund to claim, as the tax saving has already been applied at source.

“Salary sacrifice affects my pension tax relief cap.”
Salary sacrifice does not affect the amount of relief you can receive, but the total contributions still count toward your annual allowance.

Practical advice for maximising pension efficiency

Make sure you understand how your workplace pension is set up before making additional contributions.

Check that your payslip and P60 reflect the reduced taxable salary.

If you contribute to both a salary sacrifice scheme and a personal pension, track both to ensure you don’t exceed the annual allowance.

Consider asking your employer whether they reinvest part of their National Insurance savings into your pension.

Salary sacrifice schemes are most effective when managed correctly and can save thousands of pounds over the course of your career.

Final thoughts

If you already use a salary sacrifice pension scheme, you’re already receiving higher rate tax relief automatically through reduced taxable income. There’s no need to claim extra relief from HMRC.

Salary sacrifice remains one of the most efficient pension saving options available, offering both tax and National Insurance savings for employees and employers alike. Higher rate taxpayers benefit fully within the scheme’s structure, without needing to take any additional action.

As with all pension arrangements, understanding how your contributions are processed helps you make the most of the tax advantages available and avoid unnecessary claims or confusion.