Can you explain tax-relief on pensions?

Money put into a pension gets full income tax-relief which is a saving of 20%, 40% or 45% depending on which income band you are in. 

But how you receive the relief depends on how you pay-in to your pension…

• If you pay into a work pension by salary sacrifice the money goes in before income tax and National Insurance (N.I) is deducted. 

• If you pay money into a pension after it has been taxed through your salary, the government undoes this by paying tax back – For every £100 you pay-in they add £25 giving you a total of £125. Since £25 is 20% of £125, it's a total tax refund for the basic-rate tax payer. Higher-rate and additional-rate taxpayers have to reclaim the rest. 

Big red flag: Quarter million people in the UK don't reclaim their higher-rate of tax, that is a lot of money down the drain. If you earn more than £46,350 and your pension is not paid by salary sacrifice, you could be losing thousands of pounds a year. Check with your employer and if they have not arranged the extra reclaim you need to contact HMRC directly. We have a guide for that. 

This is not professional advice! If you need some of that speak with a financial advisor.