1. Home
  2. Technical Central
  3. Pensions guidance
  4. Contributions and tax relief

Contributions and tax relief

This section covers various aspects of contributions paid to UK registered pension schemes.

These can be summarised in four short points:

  • Contributions are unlimited.
  • But there are restrictions on the amount of tax relief that will be given.
  • And there are further restrictions which could potentially lead to a tax charge.
  • Fortunately there are ways to try and avoid such a charge.  

Contributions and tax relief 

The tax relief on contributions is arguably the major selling point of pensions.

An employer can pay any amount of contribution for one of their staff but it's up to their local tax office to decide whether the whole contribution receives tax relief. An individual can pay as much as they like into a pension but there's a limit on the amount of tax relief they will be given.

For higher earners, further tax relief may be given. In some scenarios, 60% tax relief is available.

The bands and rates of Scottish income tax differ from the rest of the UK.

You can use redundancy payments to pay a pension contribution, this article explains how this can be done.

Anyone can become or remain a member of a UK pension scheme, regardless of nationality and UK tax treatment. However, tax relief on personal contributions will only be available to those who are 'relevant UK individuals'. 

In specie transactions can involve pension schemes in two different ways - in specie transfers and in specie contributions. This article explains the difference.

The way in which a business is set up affects the way it can pay pension contributions and the tax relief it can claim.

Annual allowance

The annual allowance is a limit on the amount of contributions that can be made without incurring a tax charge.

This article explains how pension tax relief for individuals with high incomes will be restricted by a tapered reduction in the amount of the annual allowance.

This article explains how scheme pays works and the conditions that apply.

Carry forward

There are potential ways that tax charges can be avoided, most notably by using 'carry forward'.

CPD

Tax relief and annual allowance masterclass

Here we dig deeper into the technicalities of tax relief and the annual allowance in our webinar master-class. Recorded on 17 May 2023.

Budget update and tax year end planning

In this webinar we discuss key changes from the October 2024 Budget, including the increase in employer National Insurance, salary exchange benefits and the proposed Inheritance Tax on pensions from April 2027.

Compensation

This article investigates paying compensation payments into a pension and what the tax position is if you do.

Case studies

Other ways to avoid (or mitigate) tax charges

As well as carry forward, there are some other ways that tax charges can be avoided.

Frequently asked questions

Recycling of tax-free cash

Recycling is where an individual boosts their pension savings by taking their tax-free cash and as a result increases their contributions into one or more pension plans to gain more tax relief.

Refund of contributions

Although the general rule is that once contributions are paid into a pension plan they can’t be refunded, there are a few circumstances when they can.

Ask a question

Ask any specific questions you might have about the world of pensions or protection to our technical experts.

Get support