Pension tax relief calculator
A pension contribution costs less than it looks because HMRC tops it up. This shows your net cost, and flags the 60% band where relief is at its best.
How pension tax relief works
A pension contribution is taken from income before tax, so you get back the tax you would have paid on it. At the basic rate that is 20%, at the higher rate 40%, and at the additional rate 45%. The higher your marginal rate, the more the government adds and the less the contribution costs you.
The 60% trap, and why it is the most efficient band
Once your income passes £100,000, your £12,570 Personal Allowance is removed by £1 for every £2 you earn, disappearing entirely at £125,140. That withdrawal adds an extra 20% on top of the 40% rate, so income in this band is effectively taxed at 60%. A pension contribution that pulls your income back below £100,000 reclaims the lost allowance, giving 60% effective relief. For a higher earner it is the most efficient contribution you can make.
Worked example
On £110,000, a £10,000 contribution brings your income to £100,000 and restores your full allowance. The tax saved is about £6,000, so the £10,000 in your pension costs you only £4,000, an effective 60.0% relief.
Common questions
How much tax relief do I get on my pension?
You get relief at your marginal rate: 20% for a basic-rate taxpayer, 40% for higher rate, 45% for additional rate. So a £1,000 gross contribution costs a higher-rate taxpayer £600 after relief.
What is the 60% pension tax trap?
Between £100,000 and £125,140 of income, your Personal Allowance is withdrawn by £1 for every £2 earned. That makes the effective tax rate on income in this band 60%. A pension contribution that brings you back under £100,000 gets that 60% back, so it is the most valuable place to contribute.
How do I claim higher-rate pension tax relief?
If you pay by relief at source, the basic 20% is added automatically, and you claim the extra 20% or 25% through Self Assessment or by contacting HMRC. Salary sacrifice and net-pay schemes give the full relief upfront.