How much pension tax relief do I get?

Basic rate taxpayers get 20% relief (a £1,000 contribution costs £800 net). Higher rate taxpayers get 40% (costs £600 net). Additional rate taxpayers get 45% (costs £550 net). Via salary sacrifice, you also save National Insurance.

What is the pension annual allowance for 2026/27?

The standard annual allowance is £60,000 or 100% of earnings, whichever is lower. You can also carry forward unused allowance from the previous 3 tax years.

How does salary sacrifice pension work?

With salary sacrifice, your employer reduces your gross salary and pays the equivalent as an employer pension contribution. This saves employee NI (8% or 2%) and your employer may pass on their NI saving too, giving you more in your pension than a personal contribution.

2026/27 · Real cost of pension contributions

Pension Tax Relief Calculator 2026/27

See what a pension contribution actually costs after tax relief — and why higher-rate taxpayers are leaving thousands on the table by not using one.

Pension contribution amount (£)

Your income tax rate

National Insurance rate (if salary sacrifice)

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net cost after tax relief

Gross contribution—

Income tax relief—

NI saving (salary sacrifice)—

Net cost to you—

Effective return on net cost—

Carry-forward (3 years max)—

Cost comparison by tax rate

For a £5,000 gross pension contribution:

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Annual allowance 2026/27

Scenario	Annual allowance	Notes
Standard	£60,000	Or 100% of UK earnings, whichever is lower
Carry forward (1 year)	Up to £60,000	From 2025/26 if allowance was unused
Carry forward (3 years)	Up to £180,000	2023/24, 2024/25, 2025/26 combined
Money Purchase Annual Allowance	£10,000	Applies after you access pension flexibly
Tapered allowance	Min £10,000	Adjusted income above £260,000

The lifetime allowance was abolished from April 2024. There is no longer a cap on total pension savings — only on annual contributions.

Related calculators & guides

How pension tax relief works

In the UK, pension contributions are made from pre-tax income — the government adds basic rate relief (20%) automatically for most personal contributions. Higher and additional rate taxpayers can claim the extra relief via Self Assessment or by adjusting their tax code.

Relief at source vs net pay arrangement

Most personal pensions (SIPPs, retail pension plans) use relief at source — you contribute from net income and the pension provider reclaims 20% from HMRC, adding it to your pot. Higher rate taxpayers claim the additional 20% back via Self Assessment. Workplace pensions often use a net pay arrangement — contributions come from gross salary before tax, so relief is automatic at your full marginal rate.

Salary sacrifice — the NI bonus

Unlike personal contributions, salary sacrifice reduces your contractual salary before NI is calculated. This means 8% NI is saved on the sacrificed amount (or 2% above £50,270). Your employer's NI saving (15%) is often passed back as additional pension contribution — making it the most efficient method when available.

Can I contribute more than I earn?

No — contributions are capped at 100% of your UK earnings in a tax year, even if your annual allowance is higher. If you have no earnings (e.g. a non-working spouse), you can still contribute £2,880 net per year (the pension provider reclaims £720 basic rate relief, giving £3,600 gross).

What happens if I exceed the annual allowance?

Excess contributions are added to your taxable income for the year and taxed at your marginal rate — effectively clawing back the relief. HMRC calls this the Annual Allowance Charge. It's reported via Self Assessment.

Is pension tax relief the same in Scotland?

For relief at source pensions, basic rate (20%) relief is reclaimed automatically regardless of where you live. Scottish higher rate taxpayers can claim additional relief via Self Assessment at the Scottish rate. For net pay arrangements, full Scottish marginal rate relief is applied automatically.