Under current rules, you can claim tax relief for your private pension contributions. In the UK, there are several limits to tax relief for pension contributions.

The Annual Allowance

The annual allowance for tax relief on pensions is £40,000 for the current tax year. This limit means that an individual can only receive tax relief on pension contributions up to this amount each year. 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.

The Lifetime Allowance

The lifetime allowance limit for tax relief on pension contributions is currently £1,073,100 and will remain frozen at that level until at least April 2026. This limit applies to the total amount of pension savings an individual can build up over their lifetime before facing additional tax charges.

Tax Relief

You can get tax relief on private pension contributions worth up to 100% of your annual earnings, subject to the overriding limits. When you get tax relief, the money that would go to the government as tax goes into your pension pot instead. Tax relief means you don’t pay income tax on it now, but you will in the future. Tax relief is paid on pension contributions at the highest rate of income tax paid.

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

Your employer usually automatically applies the first 20% of tax relief, 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 to claiming tax relief in England, Wales or Northern Ireland. There are some regional differences if you are based in Scotland.

If you would like more advice and assistance with your pension, please get in touch with us at info@gkaccountingservices.com or call us on 01269 518 815, where we will be more than happy to answer any of your questions.