Do I Get Tax Relief on my Personal Pension Contributions?

Is there a tax allowance for personal pensions like with gross income? How much am I allowed to contribute before I lose any tax relief?

Question asked by Richard Swandells
Are You Pension Happy?
Call us on 02084327334
I know how much my pension is worth
I know how much my pension costs
I have clear financial goals for my retirement

Answered by Neil Adams

Yes, you do, which is one of the reasons why pensions are so worthwhile.

Tax relief on pension contributions

If you’re a basic rate taxpayer, you’ll get 20p tax relief for every pound you make in pension contributions. If you’re a higher rate taxpayer you’ll get 40p in tax relief for every pound you pay. This increases to 45p if you pay tax at the 45% additional rate (accurate as of April 2017).

To work out how much tax relief you’ll get on your pension, use our Pension Tax Relief Calculator here →

Pension Annual Allowance

There is an annual allowance of the lower of 100% of your earnings or £40,000 in 2017/18, which is maximum amount than can be contributed into all your pensions in a tax year. If you or your employer makes contributions over this amount there will be a tax charge at your marginal rate.

However, from April 2016, if your income is over £150,000 – including employee pension contributions, bonuses, interest from savings and dividends – then your annual allowance is reduced, or ‘tapered’, by £1 for every £2 you earn over £150,000, up to a maximum reduction of £30,000.

This means that, if you earn  £210,000 or more per year (so your income exceeds £150,000 by at least £60,000 pa), then your annual £40,000 allowance is cut by £30,000 (half of the £60,000 excess) to £10,000.

Pension tax relief calculator

For a less extreme example, if you earn £10,000 above the £150,000 limit, then your annual allowance is cut by £5,000 (£10,000 x 50%), from £40,000 per year to £35,000 per year.

Click here to use our Pension Annual Allowance Calculator →

Lifetime Allowance

There is also a lifetime pension allowance, which stands at £1m from the 2016/17 tax year onwards. This is the maximum total benefit that can be drawn from a pension before there is an extra tax charge, although some people may have been able to protect their lifetime allowance depending on their circumstances.

pension annual allowance
 
lifetime annual allowance
 
personal pension tax relief
 
This information does not constitute financial or other professional advice. You should consult your professional adviser or contact us directly on 02084327333 should you require financial advice. It is important to ensure any insurance policy you take out is suitable for your needs.
Start your journey today...
  Find out how a Drewberry financial adviser can help you reach your destination by making the most of your finances.
Call us on 

Frequently Asked Pensions Advice Questions

 
I smoke around 15 cigarettes per day. I’ve been charged more for Life Insurance in the past because...
 
I’ve read that the new ‘pension freedoms’ have led to a rise in the number of pension transfers....
 
I’m looking to invest for my retirement and want to know how to go about starting a new pension....
 
Could you explain annuities and taxation to me please? I’m approaching retirement and considering...
Need Help? Live chat now and get an instant answer from our Experts...

Neil
Pensions

Victoria
Insurance
Our Latest Reviews
Matthew Draper
11/07/2018

Excellent service at convenient times of the day specified by me. All product options were clearly outlined and I am very pleased.

Paul Devine
10/07/2018

First class service. Helped me through the process from start to finish. Egle and Francis were very professional and talked me though all my options. Once the policies were set up, the after care after was also first class. Highly recommend. 5 stars all day long.

Josip Marjanovich
03/07/2018

Victoria was very helpful about selection of suitable insurance. She always answered all questions in a timely manner.

We are rated 4.9/5 based on 1512 independent client reviews.
To read more of our independent client reviews click here →
REVIEWS
EXCELLENT
4.93 / 5 Average
652 Reviews
Verified Buyer
Overall Rating
The whole process was a pleasure. Drewberry we're easy to deal with, polite, knowledgeable and helpful
Verified Buyer
Overall Rating
Very good, clear service would recommend to friends and family
Anon
Overall Rating
Sam Carr provided an efficient and professional service.
Verified Buyer
Overall Rating
Sam Carr provided a professional but enthusiastic service and helped make the whole process very straight forward. Goodness knows I have been through enough application forms recently. My insurance product was never going to be easy to find and I had been rejected on a number of other occasions through others ironically due to well managed common health conditions. I identified Drewberry in a last and disappointing trawl on th web to find someone that actually wanted to take on a difficult case like me. Some brokers wouldn't even consider me. When we applied for my first choice product Sam wasn't at all deterred by the long wait for my GP report or the final rejection that came back from the insurer, sadly I have become used to it. Within a day he had lined up the second choice and to my surprise he had hit the nail on the head and introduced me to the correct insurer and terms for my needs whilst nogotiating an excellent premium. I am extremely satisfied with what Sam has achieved for me and I would have no hesitation in recommending either him or Drewberry to friends, family and and business contacts. In the future, Drewberry will be my first point of contact. Many thanks!
Kym
Overall Rating
Tailored to my need and the staff gave very good service