High earners fail to claim £1.3 billion in pension tax relief
Millions of pounds of pension tax relief are left unclaimed by higher-rate and additional-rate taxpayers every year. We explain how to make sure you claim all the tax relief you’re entitled to.


Pension savers are failing to claim millions of pounds of free cash from the government every year - with the taxman swallowing up £1.3 billion in unclaimed tax relief over five years.
According to a series of Freedom of Information (FOI) requests to HMRC, higher-rate taxpayers have left behind an average of £245 million in pension tax relief each tax year, while additional-rate taxpayers have foregone about £18 million each year.
The total amount unclaimed between 2016/17 and 2020/21 was £1.3 billion.
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Pension provider PensionBee, which submitted the FOI requests, called it an “eye-watering amount that should have gone back into savers’ pockets – or better yet, their pensions”.
We explain who’s entitled to extra pension tax relief and how to ensure you scoop up the ‘free’ cash, rather than leaving it to the taxman.
Who qualifies for pension tax relief?
Everyone can get tax relief when they pay into a pension, even children and people who aren’t working. (Although there are limits on how much tax relief you can receive; these rules are imposed via the lifetime allowance and annual allowance).
Basic-rate taxpayers normally have the correct amount of tax relief added to their pension pots. For example, when someone earning £30,000 a year (a basic-rate taxpayer) pays into their workplace pension, they would usually benefit from a 20% top-up from the government. In other words, for every £100 that is paid into their pension, the government would add £25, bringing the total contribution to £125.
Higher-rate and additional-rate taxpayers are entitled to extra tax relief. The former receives 40% relief, while the latter can get 45%.
Whether you automatically receive the full amount of tax relief on your pension contributions, or whether you have to claim back the extra money from HMRC, depends on how your pension is paid.
If the pension provider uses a “net pay” arrangement - also known as “gross tax basis” - taxpayers get the full amount of tax relief straightaway.
However, other providers - including personal pensions and some workplace pensions - use the ‘relief at source’ method. This means the provider claims the first 20% of tax relief from HMRC and pays it into the pension pot.
That’s fine if you’re a basic-rate taxpayer, but for higher earners, they will be missing out on some extra money.
This is where the £1.3 billion figure comes in: many high earners are failing to claim their additional 20% or 25% tax relief, on top of the 20% relief that’s already been paid. Some pension savers may be unaware they need to claim it, or are unsure how to do so.
Tom Selby, head of retirement policy at the investment platform AJ Bell, comments: “People often mistakenly assume they will receive all their pension tax relief automatically from HMRC. However, whether you need to make a claim to receive the tax relief you are owed will depend on several factors including your income, the type of pension scheme you contribute to and how you contribute.
“Higher earning pension savers who make personal contributions to ‘relief at source’ schemes, such as Sipps, risk missing out on hundreds, if not thousands, of pounds in tax relief if they fail to notify HMRC.”
How do I claim this extra tax relief?
If you already fill in a self-assessment tax return, you can claim the pension tax relief that way.
According to PensionBee, around three-quarters of higher-rate taxpayers eligible to claim extra tax relief on their pension contributions through self-assessment fail to do so, while almost half of eligible additional-rate taxpayers don’t claim via their tax return.
If you’re not registered for self-assessment, you can call or write to HMRC and claim your tax relief that way.
HMRC will usually adjust your tax code in order to pay the extra tax relief. If you don’t have any earnings, you may be sent a cheque instead.
By failing to claim the tax relief, higher earners are leaving hundreds of pounds of free cash on the table.
In 2020/21, higher-rate taxpayers missed out on an average of £425 each, and £527 in the case of additional-rate taxpayers.
Can I claim for previous years?
If you’re panicking that you’ve never benefited from this extra tax relief on your pension contributions, the good news is that you can claim it for previous years.
PensionBee explains: “If a pension saver is a higher or additional-rate taxpayer, and has missed out on tax relief above the 20% basic rate, they can claim relief dating back four years which, from the current tax year, is 2018/19. It’s possible to amend a tax return for up to a year after the original self-assessment deadline, either online or by 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 of tax relief from their pension provider, it shows the portion they could claim back from the government.
The figures obtained in the FOI requests reveal that the number of high earners not claiming their extra tax relief has been falling over recent years, suggesting that more people are becoming aware of the need to claim it.
Becky O’Connor, director of public affairs at PensionBee, comments: “While it’s encouraging to see the number of eligible taxpayers with unclaimed tax relief declining year-on-year, the £259 million left to the chancellor in 2020/21 is still an eye-watering amount.
“Tax relief is a vital incentive that encourages people to save efficiently towards their retirement and too many people - at both ends of the spectrum - continue to miss out on this crucial benefit.”
Ruth is passionate about helping people feel more confident about their finances. She was previously editor of Times Money Mentor, and prior to that was deputy Money editor at The Sunday Times.
A multi-award winning journalist, Ruth started her career on a pensions magazine at the FT Group, and has also worked at Money Observer and Money Advice Service.
Outside of work, she is a mum to two young children, a magistrate and an NHS volunteer.
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