How tax relief works

Pension tax relief is intended to help you save for retirement with money that would otherwise have gone to the tax man. This doesn’t mean you won’t have to pay tax on that money in the future, simply that you don’t have to pay tax on it now.

For example, a £1 contribution today costs you 80p if you’re a basic-rate taxpayer, as little as 60p if you’re a higher-rate taxpayer and 55p if you pay additional-rate tax. Exactly how it works will depend on the way your pension scheme operates its tax relief.

You’ll only get tax relief on contributions up to the amount you’ve earned in any given tax year. The amount of tax relief also depends on what rate of income tax you pay and the pension allowances you have available. You won’t get tax relief on any contributions made by an employer.

Open or top up your SIPP

Download our guide

Read our guide to find out how tax relief could work for you.

The value of investments can go down as well as up, and you may get back less than you invest. The eligibility to invest in a pension depends on individual circumstances and all tax rules may change in the future. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser. You will not normally be able to withdraw money from a pension until you are 55.