What Happens If My Workplace Pension Does Not Give Higher Rate Relief

Many people assume their workplace pension automatically gives them full tax relief at their highest tax band. Unfortunately this is not always the case. Some workplace pension schemes only provide basic rate relief, which means higher rate and additional rate taxpayers must claim the remaining relief themselves. In my opinion this is one of the most misunderstood areas of UK payroll and personal tax. It leads to thousands of people missing out on money they are legally entitled to.

If your workplace pension does not give higher rate relief it does not mean you lose the relief. It simply means HMRC does not apply the extra relief automatically through payroll. You must claim the difference yourself. Once you understand your pension scheme type and your tax position you can recover the extra relief easily.

This guide explains why some workplace pensions fail to give higher rate relief automatically, how the different pension systems work, how to check your payslip, how to claim the extra tax relief, how far back you can go and what happens if you changed jobs or earned different levels of income during the year. I will also show real world examples because they make the rules much clearer.

By the end of this guide you will know exactly what happens if your workplace pension does not give higher rate relief and how to fix it quickly.

Why Some Workplace Pensions Do Not Give Higher Rate Relief Automatically

Workplace pensions in the UK operate under two main tax systems:

Relief at source
Net pay arrangement

Only net pay arrangements give higher rate relief automatically.

Relief at source schemes give only basic rate relief automatically. If you are a higher or additional rate taxpayer you must claim the extra relief yourself.

Most people do not realise which scheme their employer uses. Many employers do not explain it clearly and many payslips make it hard to spot. In my opinion every employee who pays higher rate tax should check their pension scheme type at least once a year.

How Workplace Pension Tax Relief Works

1. Relief at source

Used by:
NEST
Aviva
Royal London
Scottish Widows
Most group personal pensions
Most SIPPs

What happens:
You pay your pension contribution AFTER tax
Your provider adds 20 percent basic rate relief
HMRC gives the provider this basic rate amount
If you pay 40 or 45 percent tax you must claim the extra relief yourself

Example:
You pay £80 from take home pay
Your provider adds £20
Total gross contribution = £100
If you pay higher rate tax you can claim another £20

This is the system where people often miss out.

2. Net pay arrangement

Used by:
Large employer schemes
Trust based schemes
Many public sector schemes

What happens:
Your pension contribution comes off before tax
Your taxable income reduces
You automatically receive full relief

There is nothing to claim.

3. Salary sacrifice (or salary exchange)

This is not technically one of the two systems although it is widely used.

What happens:
You give up part of your salary
Your employer pays it into your pension
Your taxable salary reduces
You automatically receive full relief

You also save National Insurance.

How to Tell Which System Your Workplace Pension Uses

You can check this easily using your payslip.

Signs you are in relief at source

Pension deduction does not reduce your taxable pay
Your taxable pay on the payslip is the same with or without pension deductions
Your provider adds 20 percent to your contributions

Signs you are in net pay

Your pension deduction reduces your taxable pay
Your tax calculation reflects a smaller taxable amount
You already received full relief

Signs you are in salary sacrifice

Your payslip shows a reduced salary
Your employer pension contribution increases
You do not see an employee pension deduction

In my experience most confusion happens because payslips do not label the system clearly. Looking at the taxable pay line is usually the easiest method.

What Happens If Your Workplace Pension Does Not Give Higher Rate Relief

If your workplace pension operates under relief at source you receive:

20 percent basic rate relief automatically
No automatic higher rate relief
No automatic additional rate relief

If you are a higher rate taxpayer you are entitled to an extra:

20 percent additional relief (making 40 percent total)
OR
25 percent if you are an additional rate taxpayer (making 45 percent total)

You must claim this yourself.

The good news is that HMRC will give it as long as:

You paid into a qualifying pension
You paid higher or additional rate tax in that year
You claim within the allowed time period

You do not lose the relief just because your employer’s scheme only gives basic rate relief.

How Much Extra Relief You Can Claim

If your scheme uses relief at source your pension contributions look like this:

You pay: £80
Provider adds: £20
Gross contribution: £100

If you are a higher rate taxpayer you can claim:

Another £20 (making total relief £40)

If you are an additional rate taxpayer you can claim:

Another £25 (making total relief £45)

Over a full year this can easily add up to hundreds or thousands of pounds.

In my opinion this is one of the most generous tax benefits available and many people do not even realise they are missing out.

How to Claim Higher Rate Relief Manually

You have three ways to claim depending on your tax situation.

1. Claim through Self Assessment

If you already complete a tax return you must claim here.

Steps:

Log into your Self Assessment
Find the pension contributions section
Enter the gross pension contributions
Self Assessment calculates the relief
Your tax bill reduces or you receive a refund

This is the easiest method for people already in Self Assessment.

2. Claim through your HMRC personal tax account

If you are not in Self Assessment:

Log into your personal tax account
Find the pension contributions section
Enter your gross contributions
Submit your request

HMRC will:

Adjust your tax code
Send you a refund
Or both

3. Write to HMRC

This is useful if you need to backdate more than one year and the online system is limited.

Include:

Your name
National Insurance number
Tax years you are claiming for
Gross pension contributions
Your pension provider
Confirmation that the scheme uses relief at source

HMRC usually responds within weeks.

How Far Back You Can Claim Higher Rate Relief

You can claim relief for:

The current tax year
Plus the previous four tax years

That means up to five full years of relief can be recovered.

If you earned higher rate income in any of those years and paid into a relief at source pension you may be owed money.

In my opinion many people only discover this years later when they start reviewing their pension statements. Backdating can produce substantial refunds.

What If You Changed Jobs

Changing jobs does not affect your right to higher rate relief.

It only affects:

Which pension scheme you contributed to
How much you contributed

If your old job used relief at source you can claim
If your new job uses net pay you do not claim for those months

You simply claim for the contributions made under the relief at source scheme.

This applies even if you had several jobs in the same year.

What If You Contributed to a Personal Pension as Well as a Workplace Pension

All personal pensions use relief at source. This means:

You automatically receive 20 percent
You must claim the extra relief manually

Even if your workplace pension uses net pay your personal pension still uses relief at source so the claim still applies.

What If You Were Only a Higher Rate Taxpayer for Part of the Year

You may still qualify for partial higher rate relief.

Higher rate tax applies to total taxable income, not just your salary. This may include:

Bonuses
Benefits in kind
Overtime
Second job income
Rental income
Investment income
Dividends

If any part of your income crosses the higher rate threshold you may be owed relief for that portion.

In my opinion many people assume they did not hit the higher rate threshold when in fact their bonus or benefit in kind pushed them over.

Real World Examples

Example 1: Workplace pension only gives 20 percent relief

Total pension contributions: £2,500 gross
Income: £65,000
Extra relief owed: £500

Example 2: Employee changes jobs mid year

Job A (April to August): relief at source
Job B (September to March): net pay

You claim for April to August only.

Example 3: You pay into a personal pension

Personal pension always uses relief at source
You claim higher rate relief every year

Example 4: Income fluctuates

Salary: £48,000
Bonus: £7,000
Taxable income exceeds higher rate threshold
You can claim proportional higher rate relief

Example 5: Four year backdated claim

Gross contributions: £2,000 per year
Higher rate relief: £400 per year
Four years: £1,600 refund

What Happens If You Do Not Claim

If you do not claim:

You lose the extra relief
Your pension receives only the basic rate uplift
Your total tax bill stays higher
Your pension contributions become less tax efficient

HMRC does not automatically refund unclaimed higher rate relief.

It is your responsibility to claim it.

Common Mistakes People Make

Assuming their workplace scheme gives full relief
Believing payroll handles everything
Entering net contributions instead of gross when claiming
Missing the four year deadline
Not checking payslips after changing jobs
Thinking they must earn substantially above the threshold to qualify
Forgetting about personal pension contributions

In my opinion the biggest mistake is assuming nothing needs to be done. With relief at source schemes you must claim the extra relief yourself.

Conclusion

If your workplace pension does not give higher rate relief automatically you are still entitled to it, but you must claim it directly from HMRC. The way your pension scheme applies tax relief determines how much relief you receive through payroll and how much you must claim yourself. Relief at source schemes give only 20 percent relief automatically while higher and additional rate relief must be claimed manually. You can claim the extra relief through Self Assessment, your HMRC personal tax account or by writing to HMRC, and you can backdate claims for up to four previous tax years.

In my opinion everyone who pays into a pension while earning above the basic rate threshold should check their scheme type and relief position because the extra relief can significantly reduce your tax bill and boost your pension savings over time.