SK Tax Service
Claiming higher rate tax relief on workplace pension contributions
Working out whether you can claim higher rate tax relief (through Self Assessment) on workplace pension contributions
There are three different ways that you may receive tax relief on your contributions.
1. Your employer deducts your contributions from your pay before they calculate the tax due from your pay.
This means that you receive tax relief at the highest rate of tax that you pay. This is called a net pay arrangement. You can find out if you’re in one of these schemes by looking at the scheme booklet or asking the scheme administrator.
- DON’T CLAIM VIA SELF ASSESSMENT.
2. Your employer takes your contribution from your net pay (after tax has been deducted but before they pay you) and pays this to your pension provider on your behalf.
This method is likely if you’re a member of a group personal pension, group self-invested personal pension or group stakeholder pension scheme, but could also apply to other types of personal pension schemes. This is called ‘relief at source’.
The pension provider then claims back basic rate tax at 20% from HMRC, and adds this to your pot. So, for example, if your employer has deducted a contribution of £80 from your net pay, your pension provider claims back a further £20 so a total gross contribution of £100 is paid into your pension.
If you’re a higher rate taxpayer, you can claim further tax relief (at your higher rate, less the basic rate already claimed on your behalf) from HMRC.
- YES CLAIM VIA SELF ASSESSMENT.
3. If you're paying pension contributions through a ‘salary sacrifice’ arrangement agreed with your employer, this is treated as an employer contribution, with the same effect for you as receiving tax relief but also with a saving on NI contributions.
If you do this, you give up part of your salary and your employer pays this straight into your pension. In some cases, this will mean you and your employer pay less tax and National Insurance.
- DON’T CLAIM VIA SELF ASSESSMENT.
Note. Salary sacrifice is never advisable if you are annually entitled to claim Seafarer's Earnings Deduction!
