Pension Tax Relief Calculator
Results
Results are estimates based on 2025/26 rates. Higher rate relief must be claimed via Self Assessment for relief at source pensions.
How Pension Tax Relief Works
Pension tax relief is one of the most valuable tax benefits available in the UK. When you save into a pension, the government effectively refunds the income tax you paid on that money. This means your pension contributions cost you less than the amount that actually goes into your pension pot.
Relief at Source
Most personal pensions and many workplace pensions use relief at source. Your contribution is taken from your net (after-tax) pay. The pension provider then claims basic rate tax relief (20%) from HMRC and adds it to your pot. For every £80 you contribute, your pension receives £100. Higher and additional rate taxpayers must claim the extra relief (20% or 25%) through their Self Assessment tax return.
Salary Sacrifice
With salary sacrifice, you agree to a lower contractual salary and your employer pays the difference into your pension. Because your salary is reduced before tax and NI are calculated, you save both income tax and National Insurance contributions. This makes salary sacrifice the most tax-efficient method for most employees, typically saving an extra 8% (the employee NI rate) compared to relief at source.
Net Pay Arrangement
With net pay, your pension contribution is deducted from your gross pay before income tax is calculated, so you receive full tax relief at your marginal rate automatically. However, unlike relief at source, basic rate taxpayers earning below the Personal Allowance do not receive any tax relief under this arrangement. NI is still calculated on the full salary.
Annual Allowance
The annual allowance for pension contributions in 2025/26 is £60,000. This is the maximum total pension input (including employer contributions) that benefits from tax relief in a single tax year. Exceeding this limit triggers an annual allowance charge at your marginal rate. For high earners with adjusted income above £260,000, the allowance tapers down to a minimum of £10,000.
Carry Forward
If you have unused annual allowance from the previous three tax years, you can carry it forward. This allows you to make larger contributions in a single year without incurring the annual allowance charge. You must have been a member of a registered pension scheme in each carry-forward year, and you must use the current year's allowance first before dipping into previous years.
Worked Examples
Basic Rate Taxpayer
Higher Rate Taxpayer
Salary Sacrifice (Higher Rate)
Frequently Asked Questions
When you contribute to a pension, the government adds money through tax relief. For every £80 you pay in (net), the government adds £20 as basic rate relief, making a gross contribution of £100. Higher and additional rate taxpayers can claim extra relief through their Self Assessment tax return.
With relief at source, contributions are taken from your net (after-tax) pay and the pension provider reclaims basic rate tax from HMRC. With salary sacrifice, your contractual salary is reduced before tax and NI are calculated, so you save both income tax and National Insurance on the sacrificed amount.
The annual allowance for pension contributions in 2025/26 is £60,000. This is the maximum amount of pension savings you can make each year with tax relief. If you exceed this limit, you may face an annual allowance charge. For high earners (adjusted income above £260,000), the allowance tapers down to a minimum of £10,000.
Yes. You can carry forward unused annual allowance from the previous three tax years, provided you were a member of a registered pension scheme during those years. This means you could potentially contribute more than £60,000 in a single year if you have unused allowance from earlier years.
With salary sacrifice, you save National Insurance at your marginal rate on the amount sacrificed. For 2025/26, employees pay 8% NI on earnings between £12,570 and £50,270, and 2% above that. So for most basic and higher rate taxpayers, salary sacrifice saves an additional 8% compared to relief at source.
If you use relief at source (most personal and workplace pensions), basic rate relief (20%) is added automatically by your pension provider. Higher rate (40%) and additional rate (45%) taxpayers must claim the extra 20% or 25% relief through their Self Assessment tax return. With salary sacrifice or net pay arrangements, the full relief is given automatically through your payroll.