Pension Tax Relief Calculator

PENSION TAX RELIEF CALCULATOR
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PENSION TAX RELIEF CALCULATOR

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

Calculate your tax relief

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The Pension Annual Allowance (AA) for the 2023-24 tax year is currently £60,000. 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 £60,000 Annual Allowance (AA) is only available in full if an individual earns £60,000 or over (but not over £260,000 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 than £3,600, but less than £60,000 will receive income tax relief up to 100% of Gross UK relevant earnings.
  • A person who earns £60,000 or more, but less than £260,000 of adjusted income can receive income tax relief up to £60,000.
  • A person who earns more than £260,000 of adjusted income will lose £1 of the annual allowance for every £2 that they earn over £260,000 until it falls to £10,000 p/a. Once adjusted income exceeds £360,000 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 £260,000.

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 £260,000 then the £60,000 annual allowance is reduced by £1 for every £2 over. Between £260,000 and £360,000 there is a gradual tapering. Final salary (defined benefit) employer and employee contributions are calculated in a different manner.