Pension Tax Relief Calculator

PENSION TAX RELIEF CALCULATOR

This pension calculator will show you how much tax relief you will receive when you make a personal contribution to your pension. This calculator does not apply to Scottish tax payers.

Calculate your tax relief

The Pension Annual Allowance (AA) for the 2020-2021 tax year is currently £40,000. This is the maximum limit a person can contribute across all pension schemes including employer contributions and receive income tax relief.
The income tax relief only applies to UK residents who are under 75 years of age and non-residents who have UK relevant earnings.
Relevant earnings include: Salary, bonus, commission, overtime, certain statutory benefits and net profits for self-employment.
The £40,000 Annual Allowance (AA) is only available in full if an individual earns £40,000 or over (but not over £240,000 of adjusted income), otherwise they will only receive income tax relief up to 100% of UK relevant earnings.
Examples:

  • A Non-tax payer can contribute up to £3,600 Gross per annum and qualify for income tax relief.
  • A person who earns more then £3,600, but less than £40,000 will receive income tax relief up to 100% of Gross UK relevant earnings.
  • A person who earns £40,000 or more, but less than £240,000 of adjusted income can receive income tax relief up to £40,000.
  • A person who earns more than £240,000 of adjusted income will lose £1 of the annual allowance for every £2 that they earn over £240,000 until it falls to £4,000 p/a. Once adjusted income exceeds £312,000 p/a, they will reach the maximum reduction.

N.B: In certain cases, individuals can "carry forward" any unused annual allowance from the past 3 years.

Tapered annual allowance.
The tapering of the annual allowance was introduced in April 2016. For the taper to apply, the persons threshold income must exceed £200,000 p/a and their adjusted income must also exceed £240,000.

Threshold income
Threshold income is defined as their taxable income from all sources (i.e. salary, bonus, net profits from self-employed and taxable investment income such as rent and dividends). The tapered AA will only apply if income exceeds £200,000. Any employee pension contributions under the "Net pay arrangement" are also included. If income is below £200,000 there is no requirement to calculate the adjusted income as the tapering will not apply. Anti-avoidance rules were implemented in July 2015 which means any salary sacrifice that reduces income below £200,000 will be added back to the calculation. If threshold income is more than £200,000 the persons adjusted income will also be tested.
Adjusted income
Adjusted income includes any employer pension contributions. If employer pension contributions added to their threshold income exceeds £240,000 then the £40,000 annual allowance is reduced by £1 for every £2 over. Between £240,000 and £312,000 there is a gradual tapering. Final salary (defined benefit) employer and employee contributions are calculated in a different manner.

PENSION CALCULATOR

Calculate Your pension

How much might your pension pay at retirement? Is it on track? Find out in seconds with this free pension calculator.

Pension calculator

Our pension calculator provides an estimate of how much your pension fund could be at retirement and how much retirement income you might expect to receive when selecting an Annuity or Income Drawdown.

Disclaimer: Please note that this calculator is not suitable for Final Salary (defined benefit) pension schemes. This calculator will only work with a Money purchase-based scheme (defined contribution). These Pension calculators are for the use of our students and their studies. The accuracy of these tools should not be used to make financial decisions. Clarity Financial Training Ltd will not be liable to you or anyone else for any decision made or action taken in reliance on the information given by these online tools.

How much can I get? Use our pension calculator to find out

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Add together the figures from the annual statement you get from your pension provider. If you don't have this, you can call the provider and ask for the figures.

Your estimated total pension fund at retirement age:

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Based on the value of your pension. On retirement you can take 25% tax free lump sum equal to:xx

* This figure is based on the following assumptions:

Fund performance Inflation Charges

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The remaining fund can be used to provide an income in the form of an Annuity or Flexi Drawdown.

Retirement income options: i

Drawdown:
Flexi Drawdown is an unsecured pension option on retirement. It is a higher risk strategy as the pension remains invested and can continue to fluctuate. The assets remain invested, and the retiree can choose to take income from the fund or income and capital. Please note by taking capital the fund value will deplete. Ideal for those that want control and flexibility on the amount of income taken.
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Annuity:
An annuity is a secured pension option on retirement. It is a lower risk strategy as the income remains payable for life. There is no investment risk as the Life Assurance company will pay an income to the annuitant based on the value of the fund at time of purchase and the annuity rate based on the annuitant’s age. Ideal for cautious clients as the money will not run out. Income from a level annuity is vulnerable to inflation risk.
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Fluctuations in fund performance can happen - we give examples below of how a lower and higher fund performance will impact the size of your pension pot.

Estimated total pension fund at retirement Fund performance

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ANNUITY CALCULATOR

ANNUITY CALCULATOR

FLEXI CALCULATOR

PENSION CALCUALTOR

Value of pension
25% lump sum
Fund for DD
Yield
Capital withdrawal
Income only
Income and capital
Remaining fund
Income and capital