Pension tax relief

Also called: pension, sipp, salary sacrifice, workplace pension, tax relief

The government tops up pension contributions by the income tax you'd otherwise pay on that money.

Formula

Basic rate: you pay £80, the pension receives £100. Higher rate: £100 in the pension costs £60 after claiming the extra relief

Worked example

1. You put £80 into a personal pension (relief at source)
2. HMRC adds £20 → £100 in your pension
3. A higher-rate taxpayer claims back another £20 via self-assessment, so £100 costs £60

How to read it

Add employer contributions and a pension is often the most tax-efficient way to save for retirement. The catch: you can't touch it until 57 (from 2028), and withdrawals beyond the 25% tax-free part are taxed.

See it with real numbers: Pension → (free account)