Your pension scheme type affects your tax relief. Workplace pensions offer tax benefits, but the method used, net pay or relief at source, changes how and when you get them. Your employer or pension provider should confirm which arrangement your scheme uses, and this will affect both your payslip and potential tax relief.

Net pay arrangement

In a net pay arrangement, your pension contribution is taken before tax is calculated. This reduces your taxable income, meaning you automatically receive full tax relief at your highest income tax rate. This can be the basic, higher or additional tax rates. The amount shown on your payslip includes both your contribution and the tax relief applied.

However, if you do not pay tax, for example because you earn below the personal allowance, you will not receive any tax relief under this method.

Relief at source

With the relief at source method, your pension contributions are taken after tax, and National Insurance is deducted from your pay. Your pension provider then adds 20% basic rate tax relief directly into your pension pot. This means your payslip will show only your contributions and not the tax relief.

If you are a higher or additional rate taxpayer (or pay the higher or top rate in Scotland), you can claim extra tax relief through your self-assessment return or by contacting HMRC.

Get a clear view of your future pension. Use the enhanced online service to check, boost, or track your State Pension entitlement.

The enhanced Check Your State Pension forecast service is available online, offering a faster and more complete way to understand your State Pension entitlement. This joint service from HMRC and the Department for Work and Pensions (DWP) lets most people under State Pension age see:

• How much State Pension they could get.
• When they can get it.
• If and how they can increase their State Pension, for example, by paying voluntary National Insurance contributions to fill contribution gaps.

The forecast service also highlights any shortfalls in your National Insurance Contributions (NICs) record, allowing you to take action now to boost your future pension income.

You can access the service via www.gov.uk/check-state-pension, where you’ll need to sign in securely using your Government Gateway credentials. If you don’t have them yet, you can create an account. You may need photo ID i.e., a passport or driving licence in order to verify your identity.

You can also view your pension forecast through the HMRC app, giving you secure, on-the-go access.

If you're already receiving or have deferred your State Pension, you’ll need to contact The Pension Service (UK) or the International Pension Centre (abroad) instead.

It is recommended that you regularly check your State Pension position to help optimise your entitlement. You should also consider what other savings or pensions might be required for a long and comfortable retirement.

Private pension contributions can attract up to 45% tax relief, if you know how to claim it. Use your £60,000 annual allowance wisely and carry forward unused relief from past years to boost your retirement savings.

You can usually claim tax relief on private pension contributions worth up to 100% of your annual earnings, subject to the overall £60,000 annual allowance. Tax relief is granted at your highest rate of income tax.

This means that if you are:

• A basic rate taxpayer, you receive 20% tax relief
• A higher rate taxpayer, you can claim 40% tax relief
• An additional rate taxpayer, you can claim 45% tax relief

For basic rate taxpayers, the 20% tax relief is typically applied automatically through your pension provider—no further action is needed.

If you pay higher or additional rate tax, you can usually claim the extra tax relief.

• An additional 20% on contributions corresponding to income taxed at 40%
• An additional 25% on contributions corresponding to income taxed at 45%

The tax rates and reliefs outlined above apply to taxpayers in England, Wales, and Northern Ireland. If you're based in Scotland, different income tax bands apply, which can affect the amount of tax relief available.

The annual allowance for tax-relievable pension contributions is currently set at £60,000. If you haven’t used your full allowance in the previous three tax years, you may be able to carry forward unused amounts, provided you were a member of a registered pension scheme during those years.

Turning 55 soon? From April 2028, the minimum pension access age rises to 57. If you are planning to draw your pension, you could take up to 25% tax-free. Make informed choices about your remaining pot, as the rest will usually be taxed as income. Get advice before you act.

Most personal pensions have a minimum age for access, currently set at 55 (this will increase to 57 from 6 April 2028). When you reach this age, you can begin withdrawing from your pension, and some of the benefits can be taken tax-free.

In most cases, you’re entitled to take 25% of your pension pot as a tax-free lump sum, up to a maximum of £268,275. If you have protected allowances, you may be able to take a larger tax-free amount.

In specific circumstances, such as serious illness or where certain lump sum death benefits are paid to your beneficiaries, you or your beneficiaries may be eligible to take up to £1,073,100 tax-free. This is referred to as the Lump Sum and Death Benefit Allowance.

Once you’ve taken your tax-free lump sum, you generally have up to six months to decide how to access the remaining 75%, which is usually taxable. Your options include taking further cash withdrawals, buying an annuity for guaranteed income for life and using flexi-access drawdown to invest and withdraw flexibly.

It’s important to remember that pension income (beyond any tax-free amounts) is treated as earned income and taxed under standard Income Tax rules. This includes income from your personal pension, State Pension, employment, or other taxable sources.

Want to make the most of your pension savings? You could claim up to 45% tax relief on contributions, plus carry forward unused allowances. Here’s how to boost your retirement pot with generous HMRC incentives.

Tax relief on private pension contributions is generally available up to 100% of your annual earnings, subject to specific limitations. The relief is applied at your highest rate of Income Tax, which means:

• Basic rate taxpayers are eligible for a 20% pension tax relief.
• Higher rate taxpayers can claim a 40% pension tax relief.
• Additional rate taxpayers are entitled to 45% pension tax relief.

For individuals paying the basic income tax rate, the initial 20% pension tax relief is typically applied automatically by their employer.

Higher and additional rate taxpayers can claim the additional relief through their self-assessment tax return as follows:

• An additional 20% relief on income taxed at 40%
• An additional 25% relief on income taxed at 45%

Alternatively, if taxpayers are subject to 40% income tax and do not submit a self-assessment return, they may contact HMRC directly to request the relief.

These tax relief rates apply to taxpayers in England, Wales, and Northern Ireland. It is important to note that Scotland has some regional variations for Income Tax rates.

Furthermore, there is an annual allowance of £60,000 for pension tax relief. Taxpayers have the opportunity to carry forward any unused portion of this allowance from the previous three tax years, provided they made pension contributions during those years. As of 6 April 2023, the lifetime limit for pension tax relief was abolished, offering greater flexibility in pension contributions without the previous lifetime cap.