Pension tax relief: what it is and how it can boost your retirement savings
Most Brits don’t know their pension tax relief rate. As the end of the tax year approaches, savers may be missing a valuable opportunity to boost their retirement pot via this valuable perk.
Sam Walker
Almost nine in ten Brits (88%) do not know the rate of tax relief they receive on pension contributions, according to new research, with confusion about this valuable perk potentially discouraging people from making the most of their pension annual allowance before the end of the tax year.
Pension tax relief can boost your pension savings by at least 20% and potentially 40% if you’re a higher rate taxpayer or 45% if you’re an additional rate taxpayer. Yet just 12% of those asked knew the exact rate of tax relief they personally receive on their pension contributions, a nationally representative survey of 1,000 UK adults aged 18 to 66, conducted in March 2026 by pension provider PensionBee found.
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Boost pension contributions
With the end of the tax year fast approaching on 5 April, the findings suggest many savers may be missing a valuable opportunity to boost their retirement savings through additional pension contributions that benefit from tax relief. Every tax year, savers can usually put up to £60,000, or 100% of their earnings, (whichever is lower) into a pension and get tax relief. This is known as the pension annual allowance.
But while around one in five (20%) said they plan to make an additional pension contribution before 5 April, and 9% said they have already topped up their pension this tax year, nearly half of respondents (48%) said they do not currently plan to make an additional contribution, 10% said they do not currently contribute towards a pension and 13% said they were unsure if they would contribute.
When asked where they would be most likely to invest extra money before the tax year ends, people most commonly chose savings accounts (35%) and ISAs (30%). Others said they would pay down their mortgage (12%) and make pension contributions (11%), suggesting that while many people prioritise short-term or flexible savings, a proportion are considering using the tax year end as an opportunity to boost their retirement savings. A further 6% said they would not invest the money and a final 6% said they were not sure.
Lisa Picardo, chief business officer UK at PensionBee, said: “Pension tax relief is one of the most valuable incentives available to UK savers, yet our research shows that most people don’t fully understand how it works – or even that they benefit from it.
“With the end of the tax year approaching, it’s a good moment for savers to review their finances and consider whether they could make an additional pension contribution. Even a small top-up can receive a boost through tax relief, helping retirement savings grow over time. For those with access to salary sacrifice through their workplace, contributing this way can also bring additional tax and National Insurance savings, although the rules are expected to change in the future.
“While savings accounts and ISAs are often the first options people think of, pensions remain one of the most important tax-efficient ways to invest for the long term. Improving awareness of these benefits could help more people make the most of the incentives available to them.”
PensionBee’s Pension Tax Relief Calculator shows how much tax relief savers could get on their pension contributions. For higher and additional rate taxpayers in particular, this can also include claiming extra relief through Self Assessment – something previous research has highlighted many people fail to do, leaving significant sums in unclaimed tax relief each year.
Unclaimed tax relief
People have until 31 January to file their self-assessment returns online and declare any tax they owe for the previous tax year, but it is also an opportunity to claim any relief they’re due.
UK taxpayers saved £32.3 billion overall in 2024/25 through pension tax relief, according to the latest figures from HMRC. It expects this figure to rise to £33.5 billion in 2025/26.
However, hundreds of thousands of higher rate taxpayers could be missing out on an extra £1 billion by not claiming their fair share, according to Freedom of Information (FOI) figures obtained from HMRC.
The figures, shared with Steve Webb, former pensions minister and now consultant at pensions firm LCP, suggest 807,000 higher rate taxpayers failed to claim an average of £1,756 of pension tax relief through relief at source pension plans in 2023/24.
In addition, a further 19,000 additional rate taxpayers on the same type of pension plan failed to claim relief worth £2,195 on average.
It comes with higher numbers of people being dragged into paying more tax as income tax thresholds are frozen and incomes rise.
According to HMRC figures, there was a 42.6% increase in the number of higher rate taxpayers between 2021 and 2024 due to frozen thresholds.
Webb said: “With more and more people being dragged into higher rates of income tax, it is increasingly important that they claim all the tax relief to which they are entitled."
You can backdate claims for pension tax relief by up to four years.
What is pension tax relief?
To encourage people to save for retirement, HMRC gives tax relief on pension contributions. This is applied at your marginal rate – 20%, 40% or 45%.
Everyone can get tax relief when they pay into a pension, even children and people who aren’t working. However, there are limits on how much you can receive (imposed via the £60,000 annual allowance).
“It means that a £1,000 pension contribution for a basic-rate taxpayer only costs them £800,” says Helen Morrissey, head of retirement analysis at Hargreaves Lansdown.
“For higher and additional-rate payers, it is even more attractive with the same contribution only costing them £600 and £550 respectively.”
Do I need to claim pension tax relief?
If you are in a “net pay” pension scheme where pension contributions are made before you are taxed, you will automatically receive any tax relief you are owed without having to claim it.
However, if you are in a “relief at source” pension scheme (where contributions are made after tax is deducted), you may need to take action.
Although your pension provider will automatically claim tax relief on your behalf if you are in a “relief at source” scheme, they do this at the basic-rate level. This means you will only receive 20%, despite the fact that higher and additional-rate taxpayers are entitled to 40% and 45%, respectively.
If you are eligible for higher or additional-rate pension tax relief and haven’t claimed it yet, you can do so by filing a self-assessment tax return before the deadline on 31 January.
How to claim pension tax relief
If you are a higher or additional-rate taxpayer, the first thing you should do is check what kind of pension scheme you are paying into.
If your pension contributions are being paid into a net pay scheme, you don’t need to take any action. If you are paying into a “relief at source” scheme, you should file a tax return.
SIPPs and personal pensions generally fall into the “relief at source” category, as well as some workplace pension schemes. If you are unsure, check with your pension provider or employer.
“Many people assume the process of claiming higher or additional-rate pension tax relief is complicated, but in fact, it’s pretty straightforward,” says Rob Morgan, chief analyst at wealth management firm Charles Stanley.
He adds: “You can claim the tax relief on your self-assessment tax return by stating the gross amount of your total pension contributions for the tax year, including the 20% basic-rate relief already added.
“If you use the online service, HMRC calculates how much tax you have overpaid and then offsets any additional tax you owe against it.
“At the end of the process your net tax position for the year is adjusted. If you have overpaid, the balance can be refunded to your bank account as a tax rebate, or you can choose to pay less tax each month in the next financial year through a new tax code.”
You should consider paying the rebate into your pension (rather than keeping it in your bank account) to boost your retirement fund.
Backdated claims for pension tax relief
If you are panicking that you have never benefited from this extra tax relief on pension contributions, the good news is you can claim it for previous years. You can claim relief dating back four years, either through amending a previous tax return or contacting HMRC directly.
PensionBee has created a Pension Tax Relief Calculator to show savers how much tax relief could be added to their pension pot. If they’re not already receiving the full amount from their pension provider, it shows the portion they could claim back from the government.
How those in the £100k tax trap can get 60% pension tax relief
People with incomes over £100,000 can claim 60% pension tax relief on the amount up to £125,140, due to the fact the personal allowance is reduced by £1 for every £2 earned above £100,000.
Claiming pension tax relief on earnings in between this bracket, where people are hit by the “60% tax trap”, can also reduce someone’s income to below £100,000, making them eligible for free childcare hours or tax-free childcare.
Research by wealth management group Rathbones suggests tax relief claimed at 60% and then invested back into your pension can significantly boost your retirement pot.
It found someone making a £10,000 contribution to their pension, taken from earnings between £100,000 and £125,140, would get £5,000 in pension tax relief in one tax year.
