You can claim tax relief for your private pension contributions. The current annual allowance for tax relief on pensions is £40,000. Remember, that there is now just 3 months left in the current tax year in which to maximise the amount of tax relief you can claim by topping up your pension pot.
There is a three-year carry forward rule that allows you to carry forward previous years unclaimed allowances. There is also a lifetime limit for tax relief on pension contributions. The limit is currently £1.055 million.
You can claim tax relief on private pension contributions worth up to 100% of your annual earnings, subject to the overriding limits. Higher rate tax relief is allowed.
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
The first 20% of tax relief is usually automatically applied by your employer 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 Income Tax rates are different in Scotland.
