You can claim tax relief for your private pension contributions. The annual allowance is £40,000 for the current tax year. there is also a facility 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 is also a lifetime limit for tax relief on pension contributions. The current lifetime limit is £1.03 million.
You can obtain tax relief on private pension contributions worth up to 100% of your annual earnings, subject to the overriding limits. Tax relief is allowed at your highest rate of Income Tax paid.
This means that if you are:
- A basic rate taxpayer, you can claim 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 deducted 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.