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Beginners’ Guides
Beginners’ guide to pensions and retirement
How does it work if I am a basic rate taxpayer?
If, for example, you make a payment of £80 a month to your individual pension plan, HM Revenue and Customs will top it up with an additional payment of £20 (basic rate tax relief). So you now have £100 a month going into your pension plan.
| What you pay: | £80 |
| Add tax relief: | £20 |
| Total going in to your pension: | £100 |
How does it work if I am a higher rate taxpayer?
If, for example, you pay the same £80 you’ll get the same automatic £20 top-up. You can then claim the difference between basic and higher rate tax relief in your self-assessment tax return. This is currently £20, so your £100 gross payment effectively costs you only £60 under current tax rules.
| What you pay: | £80 |
| Add automatic tax relief: | £20 |
| Additional tax relief you reclaim: | £20 |
| Net cost to you: | £60 |
| Total going in to your pension: | £100 |
The information on this page is based on current tax rules, which may change in the future.
Additional rate taxpayers (those with taxable income over £150,000 pa) may also claim additional rate tax relief via their tax return.
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