Pension Tax Relief Explained: How It Works, Who Gets What, and Why You Might Be Owed More
How pension tax relief works, who gets it, and why higher-rate taxpayers are often owed
more than they receive — a clear guide with worked examples and tax-band tables.
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The basic idea — and why it gets complicated
Pension tax relief exists because the government wants to encourage people to save for retirement. The principle is simple: money you put into a pension isn't taxed at the point you contribute it.
In practice, this means the government tops up your pension contributions. For a basic-rate taxpayer, a £100 contribution costs £80 out of pocket — HMRC adds the other £20. For a higher-rate taxpayer, that same £100 contribution should ultimately cost only £60, with £40 coming from tax relief.
That's the theory. The reality involves three different pension scheme types, different rates across income bands, and — for higher earners — a step you have to take yourself
How your pension receives tax relief: three types of scheme
The type of pension scheme you're in determines everything about how tax relief is applied — and whether you need to do anything yourself.
Which pension types are relief at source?
Workplace pensions
A workplace pension is a pension your employer enrols you into as part of your employment. Most workplace pensions operate on a net pay or salary sacrifice basis, meaning tax relief is applied automatically through payroll and there is nothing further to claim.
However, some workplace pension schemes are relief at source. NEST — the National Employment Savings Trust, and one of the UK's largest workplace pension providers — operates exclusively as a relief-at-source scheme. If you're enrolled in NEST, your provider claims the basic 20% on your behalf, but any additional relief you're entitled to as a higher or additional-rate taxpayer needs to be claimed by you.
SIPPs (Self-Invested Personal Pensions)
A SIPP is a pension you set up and manage yourself, independently of any employer. You choose where the money is invested and make contributions directly.
SIPPs almost always operate on a relief-at-source basis. Your provider claims the basic 20% tax relief automatically and adds it to your pot — but if you're a higher or additional-rate taxpayer, the extra relief is not added automatically. You need to claim it yourself, either through a Self Assessment tax return or by writing to HMRC directly
If you have a SIPP and pay tax above the basic rate, it is highly likely you have additional relief to claim.
Relief at source: the 20% that's automatic, and the extra that isn't
In a relief-at-source pension, your provider claims basic-rate relief on your behalf and adds it to your pot automatically. But if you pay tax above the basic rate, the government owes you more — and that extra relief doesn't come automatically. You have to claim it.
Here's how the numbers work for two real-world earners:
What higher-rate and additional-rate taxpayers are entitled to
Higher-rate taxpayers are people whose income exceeds £50,270 — the point at which the 40% tax band begins in England, Wales and Northern Ireland.
Additional-rate taxpayers are those earning above £125,140, where the rate rises to 45%.
If your income sits in either of these bands and you contribute to a relief-at-source pension, you are likely entitled to claim additional relief that hasn't been paid to you automatically. The table below shows exactly what each band is entitled to:
Why most people miss it
The pension provider handles the basic 20% so smoothly that most people assume everything is taken care of. There's no notification from HMRC that you might be owed more. Employers don't flag it. It doesn't appear on your payslip.
The people most likely to be affected are also those who often have the most on their plates: higher earners who've recently crossed the 40% threshold due to frozen tax bands, people who've changed jobs or moved between pension types, and those whose income fluctuates year to year.
John has been filing Self Assessment returns for years — but has never entered his pension contributions.
The mechanism to claim was right there every time. He just didn't know what to put where.
Claiming relief from previous years: the four-year window
If you've been a higher or additional-rate taxpayer for several years and never claimed your additional pension tax relief, HMRC doesn't simply write it off.
You have a four-year window from the end of each tax year to submit a retrospective claim — meaning right now you could potentially claim back to the 2022/23 tax year.
Each year is assessed on its own terms — using the income, contributions, and rules that applied in that specific year. The higher-rate threshold was different in 2022/23 than it is today, and a claim that spans multiple years needs to apply the correct figures for each one, not today's rules applied backwards.
The window moves forward each April. Once a tax year falls outside the four-year window, any unclaimed relief for that year is gone permanently.
How to claim the relief you're entitled to
You can claim additional pension tax relief through a Self Assessment tax return or by writing to HMRC directly.
If you file Self Assessment: our claim pack gives you step-by-step instructions and everything you need to fill in the pension tax relief section correctly — the exact figures, which boxes to complete, and how to present your contributions year by year. You don't need to work it out yourself.
If you don't file Self Assessment: we prepare a claim letter ready to send directly to HMRC.
Start with Potly's free calculator to find out whether you're eligible and get an accurate estimate of what you might be owed. If you are eligible, our team of specialists prepares your full pension tax relief pack, which includes:
You can claim for the current tax year and up to four prior tax years — so if you've been a higher-rate taxpayer for several years and never claimed, the total is often considerably more than a single year suggests. Once submitted, HMRC typically responds within 8 to 12 weeks, and refunds are paid directly to your bank account.
Potly provides administrative support and specialist review only — not financial or pension advice. Figures shown are illustrative; your actual entitlement depends on your income and contributions in each tax year.
Check what you’re owed
You could be leaving money on the table. Use our free calculator to find out.
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