Muras Matters: Workplace Pension Contributions Higher Rate Tax Relief

Workplace Pension Contributions

Higher Rate Tax Relief



As a result of employers responsibilities under auto-enrolment most employees are now paying pension contributions into their workplace pension schemes. HMRC have made it very easy for basic rate taxpayers to get the full relief they are entitled to as, regardless of whether the contributions are given through salary sacrifice or through a net pay arrangement, basic rate tax relief is given automatically.

This is not the case for higher rate and additional rate tax payers and the additional relief they are entitled to is not always automatic, hence action may be required to claim it.


It is important to understand the significance of the additional relief as it can result in large tax savings. The additional relief comes from an extension of the basic rate tax band so if a £10,000 gross contribution is made, the basic rate tax band is extended from £33,500 to £43,500 for the 2017/18 tax year. This means that an additional £10,000 of income can be taxed at 20% rather than at 40% so the additional relief to be claimed is 20% of the gross contribution. An example of how this works in practice is shown below:

  Without Additional Relief With Additional Relief
£ £
Employment Income 70,000 70,000
Personal Allowance (11,500) (11,500)
Taxable Income 58,500 58,500
£33,500/ £43,500 @ 20% 6,700 8,700
£25,000/ £15,000 @ 40% 10,000 6,000
Tax Liability 16,700 14,700

Depending on the nature of the scheme, and the individual pension arrangements, higher rate relief can be automatic but for many higher rate tax payers it needs to be claimed. This would normally be done via an individuals self assessment return however if a tax payer is not within self assessment it can often be missed. Further it is not always apparent from and individuals end of year form P60 what contributions have been made.

It is possible for an individual who has missed claiming the higher rate relief to go back for up to 4 years and make a late claim. If you would like help in doing this, or would like more information on other income tax reliefs which may be available, please contact our Tax Director, Jenny Marks.

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