How does pension tax relief work?

The great thing about paying into a
pension is that when you put money in the government does too. Everyone under
the age of 75 and a UK resident can claim tax relief. This is how it works If you pay £800 into your pension the government will automatically add
another £200 that’s a £1000 in your pension That’s what you’ll get if you pay tax at a rate of 20% or less. If you pay tax at a
higher rate you can claim back more for example if you’re a 40% tax payer and you pay in £800 this will automatically get topped up
to £1000 and this £1000 is what’s known as your
gross contribution. But because you’re a 40% tax payer and you’ve only
received 20% tax relief you could claim up to another 20% back so
for that gross contribution of £1000 you could receive up to
another £200 meaning the £1000 pounds in your pension has cost
you as little as £600 and if you’re a 45% tax payer
you could get even more back – the exact amount of tax relief you receive will
depend on how much tax you’ve paid. there are limits on how much you can pay in each tax year and get tax relief You should check these limits before you pay any money in. The money you put in your pension can usually only be accessed
from age 55 rising to 57 from 2028 and remember tax rules can change. You can
find more information on our website

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