What is higher rate pension tax relief?
As an incentive the government gives tax relief on personal pension contributions at the highest rate of tax you pay.
This means if you are a higher rate tax payer you could be entitled to an additional 20% tax relief on your private pension contributions. Many higher rate tax payers don’t claim back what they are entitled to and pay too much tax through PAYE. The higher rate pension tax relief available has to be claimed by you and will not be applied automatically.
How the pension tax relief calculator works
The calculator works out what you may be due by calculating 20% of the value of your pension contributions in the last four tax years. The calculator gives you a quick and easy way to estimate the value of your higher rate pension tax relief claim.
A pension tax refund example:
This example uses a total pension contribution of £10,000.
£10,000 pension contributions
20% of £10,000 is £2000
Total additional higher rate pension tax relief available £2000
Four year higher rate pension tax relief limit
The tax office lets you reclaim overpaid tax for the last four tax years only. If you leave it any later you will normally lose any money you are owed.
Most higher rate tax payers will make private pension contributions for many years meaning the value of the additional 20% tax relief available is substantial.
How do I know if I am a higher rate tax payer?
To find out if you have paid tax at the higher rate you will need to know which taxable band your income fits into. Being a higher rate tax payer means you pay tax at 40% or more. The taxable bands usually change each tax year so it’s best to check if you are unsure.
Higher rate pension tax relief taxable bands
The table below lets you know when you start paying the 40% higher rate of tax in each of the last four tax years.
| TAXABLE BANDS | 2019-2020 | 2020-2021 | 2021-2022 | 2022-2023 |
|---|---|---|---|---|
| Basic rate: 20% | £12,501 – £50,000 | £12501 – £50,000 | £12,501 – £50,001 | £12,571 – £50,270 |
| Higher rate: 40% | £50,001 – £150,000 | £50,001 – £150,000 | £50,001 – £150,000 | £50,271 – £150,000 |
| Additional rate: 45% | Over £150,000 | Over £150,000 | Over £150,000 | Over £150,000 |
Be aware that the government can change income tax rates and bands quite regularily so it’s best to check if there has been any amendments before claiming.
How to claim your pension tax refund
How you claim your pension tax rebate depends on your own set of circumstances. Information from the pension provider confirming the type of pension scheme and payments made in each tax year is normally needed.
Higher rate pension tax relief through PAYE
If you are employed under PAYE and do not complete a self assessment tax return you will need to apply in writing for your additional pension tax relief to:
Pay As You Earn and Self Assessment, HMRC, BX9 1AS.
Higher rate pension tax relief through Self Assessment
If you complete a self assessment tax return you need to include your private pension contributions in your tax return.
There is a designated section in your SA100 tax return to include your annual private pension contributions found under the specific section called ‘Tax reliefs’.
You can amend any tax returns that have been submitted in the past which didn’t include your private pension contributions.
This process is called an overpayment relief claim and must be made within strict timescales to allow for any refund of tax due to be issued.
Take a look at our Pension Tax Relief Guide to find out more about pensions and the tax relief that higher rate taxpayers can claim.
