Overview of private pension contributions

You can usually claim tax relief for your private pension contributions. There is an annual allowance for tax relief on pensions of £60,000 for the current 2023-24 tax year. The annual allowance was £40,000 in 2022-23.

There is a three year carry forward rule that allows you to carry forward any unused amount of your annual allowance from the last three tax years if you have made pension savings in those years. There also used to also be a lifetime limit for tax relief on pension contributions but this was removed with effect from 6 April 2023.

You can qualify for tax relief on private pension contributions amounting to 100% of your annual earnings, subject to the overriding limits. Tax relief is paid on pension contributions at the highest rate of Income Tax paid by the contributor.

This means that if you are:

  • A basic rate taxpayer you get 20% pension tax relief.
  • A higher rate taxpayer you can claim 40% pension tax relief.
  • An additional rate taxpayer you can claim 45% pension tax relief.

The first 20% of tax relief is usually applied by your employer with no further action required if you are a basic-rate taxpayer. If you are a higher rate or additional rate taxpayer, you can claim back any further reliefs on your Self-Assessment tax return.

The above applies for claiming tax relief in England, Wales or Northern Ireland. There are regional differences if you are resident for Income Tax in Scotland.

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