How Do I Calculate the Tax Relief Due on My Pension Contributions

Understanding pension tax relief

When you pay into a pension, the government gives you tax relief based on your income tax rate. This means that part of the money that would have gone to HMRC is instead added to your pension pot.

The aim is to encourage long-term saving by effectively topping up your contributions. The amount of tax relief you receive depends on:

How much you contribute

Your income tax rate

The type of pension scheme you’re in

Whether your contributions are made before or after tax

The higher your tax band, the greater the tax relief you receive.

How pension tax relief is applied

There are three main ways pension tax relief can be given:

Relief at source: Used by most personal and workplace pensions. You pay contributions after tax, and your provider claims 20% basic rate relief from HMRC on your behalf.

Net pay arrangement: Used by some workplace schemes. Contributions are taken from your gross pay before tax, giving you full relief automatically at your highest tax rate.

Salary sacrifice: You agree to give up part of your salary, and your employer pays that amount into your pension. Since your taxable income is reduced, you receive full tax relief automatically and save on National Insurance too.

To calculate your relief, you first need to know which method your pension uses.

Basic rate tax relief

If you are a basic rate taxpayer (earning up to £50,270 in the 2025 26 tax year), you receive 20% tax relief.

For example:

If you pay £80 into your pension, your provider claims £20 from HMRC and adds it to your pot, giving you £100 in total.

In other words, every £80 you contribute effectively becomes £100, and you’ve saved £20 in tax.

If you are in a net pay or salary sacrifice scheme, this happens automatically because the contribution is deducted before tax is calculated.

Higher rate and additional rate tax relief

If you are a higher rate taxpayer (earning between £50,271 and £125,140), you are entitled to 40% tax relief.

That means for every £100 contributed to your pension:

£20 is added automatically by the provider (basic rate).

You can claim another £20 through your tax return or by contacting HMRC.

For additional rate taxpayers (earning above £125,140), total relief is 45%. You still receive the first 20% automatically, and can claim an extra 25%.

Example for a higher rate taxpayer

If you contribute £10,000 to your pension:

Your provider adds £2,500 basic rate relief (grossing it up to £12,500).

You can claim a further £2,500 (20% of £12,500) through HMRC.

So your total tax relief is £5,000, meaning it only costs you £7,500 to put £12,500 into your pension.

This same logic applies at the 45% rate, where a £10,000 contribution costs just £5,500 after full relief.

How to calculate your personal pension tax relief

You can calculate your pension tax relief in four steps:

Work out your total gross contribution.
If your provider adds 20% automatically, multiply your personal contribution by 1.25 to find the gross amount.
Example: £400 × 1.25 = £500 gross.

Find your highest tax band.
Use your annual income to determine whether you are a basic, higher, or additional rate taxpayer.

Apply your tax rate.
Multiply your gross contribution by your marginal tax rate to find the total relief due.

Subtract any relief already added.
If your provider has already added 20%, deduct this amount to see how much more you can claim from HMRC.

Example calculation

You earn £70,000 and contribute £8,000 to your pension.

Your provider adds 20% relief, making it £10,000 gross.

As a higher rate taxpayer, you’re entitled to 40% relief (£4,000).

£2,000 (20%) is already added automatically, so you can claim an extra £2,000 from HMRC.

Total benefit: £4,000 tax saving, making your £10,000 contribution cost £6,000 in real terms.

How to claim higher or additional rate relief

If your pension provider operates relief at source, you must claim extra relief yourself. There are two ways to do this:

Through your Self Assessment tax return: Include the gross amount of your contributions in the pension section. HMRC will adjust your tax bill or issue a refund.

By contacting HMRC directly: If you don’t complete Self Assessment, you can ask HMRC to change your tax code, which gives you the extra relief in your pay.

In both cases, HMRC will check your income to calculate the correct adjustment.

If your pension uses net pay or salary sacrifice, you don’t need to claim anything — your full relief is already applied automatically.

Pension contribution limits

The annual allowance limits how much you can contribute each year while still receiving tax relief. For 2025 26, this is £60,000 or 100% of your earnings, whichever is lower.

If you exceed this limit, you may need to pay a tax charge on the excess.

High earners with adjusted income above £260,000 may have their allowance reduced under the tapered annual allowance. However, unused allowances from the previous three tax years can often be carried forward.

Common misconceptions about pension tax relief

“I can claim 40% relief even if I’m a basic rate taxpayer.”
No. You can only claim relief based on your highest income tax band.

“My employer’s contributions count towards my relief.”
Employer contributions don’t attract personal tax relief because they’re made before tax. However, they count towards your annual allowance.

“I need to claim tax relief every year.”
Only if your scheme uses relief at source. If your contributions are deducted before tax (net pay or salary sacrifice), there’s nothing to claim.

Checking your records

You can check your pension contributions and tax relief through:

Your annual pension statement

Payslips showing deductions and employer contributions

Your Personal Tax Account on the HMRC website

Keeping accurate records helps you ensure you’re receiving the correct amount of relief and staying within the annual allowance.

Final thoughts

Calculating your pension tax relief is easier once you understand how your scheme works. The key is to know whether contributions are made before or after tax and which income band you fall into.

For most employees, the system applies relief automatically, but higher and additional rate taxpayers using relief at source must claim the extra portion from HMRC.

By taking a few minutes to check your figures and understand the process, you can make sure you’re getting the full benefit of pension tax relief — turning every contribution into a more powerful step toward your financial future.