If you’re a higher rate taxpayer or additional rate taxpayer, you could be missing out on thousands of pounds in unclaimed higher rate tax relief on pension contributions each tax year. Most people only receive the basic rate automatically, meaning extra tax relief is sitting there waiting for you to claim it.

Here’s how higher rate tax relief on pension contributions really works, what you can claim, and how to make sure your retirement savings get the full boost HMRC allows.

What tax relief applies to pension contributions?

When you make personal pension contributions, the government tops up your pension pot by refunding some of the income tax you’ve already paid. The rate depends on the Income Tax band you fall into:

• Basic rate tax relief – 20%
• Higher rate tax relief – 40%
• Additional rate tax relief – 45%

That means your personal contributions could give you more tax benefits than you realise.

Basic rate taxpayers get their 20% tax relief automatically through “relief at source”, where your pension provider claims it for you.

If you’re in a net pay arrangement or net pay scheme, your employer deducts contributions from your gross pay, giving you tax relief immediately by reducing your taxable income.

How higher and additional rate tax relief works

If you pay income tax at 40% or 45%, you don’t automatically receive the extra tax relief. Instead, you need to claim tax relief either through:

• Your self assessment tax return, or
• Contacting HMRC to adjust your tax code (if you don’t submit a return)

You can claim additional tax relief on the portion of income taxed at the higher rate:

• Extra 20% for higher rate taxpayers
• Extra 25% for additional rate taxpayers

This can reduce your overall tax bill, generate a tax rebate, or update your tax code so you pay less tax during the year.

Pension allowances: what you can contribute

You can normally receive tax relief on pensions up to the lower of:

• £60,000 annual allowance, or
• Your relevant UK earnings

If you have unused allowance from the previous three tax years, you can carry it forward—as long as you were a member of a pension scheme in those years.

There are some exceptions:

• Money Purchase Annual Allowance (MPAA): typically £10,000 if you’ve flexibly accessed your pension.
• Tapered annual allowance: applies if your income is above HMRC thresholds, reducing your limit.
• Annual allowance charge: applies if you exceed your permitted allowance.

The lifetime allowance was abolished from 6 April 2023, meaning there’s no longer a cap on the size of your pension savings, though other tax rules still apply.

Why claiming tax relief matters

Failing to claim higher rate or additional rate tax relief means:

• Your private pension grows less quickly
• You lose out on money HMRC intends you to receive
• Your retirement savings fall short over time

At HLWA, we regularly help clients ensure they claim higher rate tax relief correctly, understand their pension tax relief works, and maximise their personal pension contributions, especially when juggling other tools like salary sacrifice scheme options, employer contributions, and complex income tax bands.

Need help understanding your pension tax position?

If you’re unsure how much you can contribute, how to make gross contributions, or whether you’re due extra tax relief, HLWA can step in…

We’ll help you:

• Check your UK earnings and allowable contributions
• Review your self assessment
• Confirm your tax rules and allowances
• Make sure you receive full tax relief you’re entitled to
• Avoid unexpected HMRC charges