UK pension contributions receive tax relief at your marginal rate. Calculate the effective cost of a pension contribution after the tax relief is applied.
Quick answer. UK pension contributions receive tax relief at your marginal rate. Calculate the effective cost of a pension contribution after the tax relief is applied.
Interactive calculator
UK pension tax relief calculator
Tax relief on personal pension contributions at your marginal rate, with the tapered annual allowance for high earners.
Annual allowance after taper-
Contribution within allowance-
Tax relief received-
Net cost of contribution-
How is this calculated?
Standard annual allowance: 60,000 GBP. Adjusted income above 260,000 tapers the allowance down by 1 GBP per 2 GBP, to a floor of 10,000 at adjusted income of 360,000 or more. Relief is contribution within allowance times your marginal rate.
Source: HMRC Pension Tax Rules 2024-25.
About this calculator
UK pension contributions receive tax relief at your marginal income tax rate, making them one of the most tax-efficient savings vehicles in the country. This calculator applies the 2026/27 annual allowance (60,000 pounds, tapered above 260,000 adjusted income) and your marginal rate to show the relief and net cost of a contribution.
How it works
Annual allowance (AA) = 60,000 if adjusted income <= 260,000
else max(10,000, 60,000 - (adjusted income - 260,000) / 2)
Contribution within AA = min(contribution, AA)
Tax relief = Contribution within AA x marginal rate
Net cost = Contribution within AA - tax relief
Marginal rate = 20 percent basic, 40 percent higher, 45 percent additional. Scottish taxpayers use 19 to 48 percent bands.
Adjusted income includes salary, bonus, rental, dividends, and the employer pension contribution.
Annual allowance taper = lose 1 pound of allowance per 2 pounds of adjusted income above 260,000.
Worked example (2026/27)
A higher-rate UK taxpayer earns 120,000 pounds (adjusted income) and contributes 20,000 pounds gross to a SIPP.
Adjusted income 120,000 is under 260,000, so annual allowance is the full 60,000.
Contribution 20,000 is fully within the allowance.
Provider Relief At Source = 20 percent of 20,000 = 4,000 pounds (added automatically).
Higher-rate top-up via Self Assessment = (40% - 20%) x 20,000 = 4,000 pounds (refunded via tax return).
Total tax relief = 8,000; net cost to take-home = 20,000 - 8,000 = 12,000 pounds.
If instead income was 110,000 (inside the 60% trap), relief would jump to 12,000 (60 percent) and net cost would drop to 8,000.
Result: 20,000 pounds in the pension at a true cost of 12,000 to take-home. After 25 years at 5 percent real return, the pot grows to ~67,700 pounds, a 5.6x effective return on the actual cash sacrifice.
Reference: 2026/27 UK pension tax relief
Rule
Limit / rate
Standard annual allowance
60,000 pounds
Tapered allowance starts
Adjusted income over 260,000
Tapered allowance floor
10,000 (at adjusted income 360,000+)
Money Purchase Annual Allowance
10,000 (after flexibly accessing pension)
Basic rate relief
20% (added by provider via RAS)
Higher rate top-up
+20% via Self Assessment
Additional rate top-up
+25% via Self Assessment
Carry forward
Up to 3 prior years
Lifetime allowance
Abolished 6 April 2024; lump-sum allowance 268,275
Tax-free lump sum (PCLS)
25% of pot, capped at the 268,275 LSA
State Pension (full new)
11,973 pounds per year (2026/27, weekly 230.25)
Common mistakes
Forgetting to claim higher-rate relief. Provider only claims basic 20 percent. Higher and additional rate payers must file Self Assessment or notify HMRC to claim the extra; roughly 80 percent of eligible higher-rate payers leave money on the table.
Ignoring the taper for high earners. Adjusted income includes employer contributions, so a 200,000 salary with a 30,000 employer top-up gives adjusted income of 230,000, just under taper but close.
Exceeding the annual allowance. Excess contributions trigger an Annual Allowance Charge at your marginal rate, wiping out the relief.
Triggering the MPAA. Once you flexibly access any pension (UFPLS, drawdown), your future DC allowance drops permanently from 60,000 to 10,000.
Carry forward without scheme membership. You must have been a member of a UK registered pension scheme in each of the prior three years to carry forward unused allowance.
Using salary sacrifice without checking NI thresholds. Salary sacrifice saves employee NI 8/2 percent on top of income tax, but the lower salary can affect mortgage borrowing and statutory benefits.
Pension contributions get tax relief at your marginal income tax rate. The provider automatically claims back the basic 20 percent (Relief At Source) so a 100 pound contribution costs 80 pounds net. Higher and additional rate taxpayers claim the extra 20 or 25 percent via Self Assessment or by tax code adjustment.
What is the 2026/27 annual allowance?+
60,000 pounds per year or 100 percent of relevant UK earnings if lower. The allowance tapers down by 1 pound per 2 pounds of adjusted income above 260,000 pounds, to a floor of 10,000 at adjusted income of 360,000 or more.
Can I use unused allowance from prior years?+
Yes via Carry Forward: up to 3 years of unused annual allowance can be added to the current year, but only after the current year is fully used. You must have been a member of a UK registered pension scheme in each carry-forward year, and current-year earnings must support the total contribution.
Why is the 60 percent trap dodged by pension contributions?+
Income between 100,000 and 125,140 pounds loses personal allowance at 50p per pound, giving a 60 percent effective marginal rate. A pension contribution reduces adjusted income, restoring the personal allowance. A 10,000 pound contribution at this income range delivers 6,000 pounds of relief, making the net cost only 4,000 pounds.
Is salary sacrifice better than relief at source?+
For most employees, yes. Salary sacrifice routes the contribution before income tax and before employee National Insurance (8 percent up to the upper earnings limit, 2 percent above), so a basic-rate employee saves the 20 percent tax plus the 8 percent NI rather than only the tax. Employers also save 15 percent NI on the sacrificed amount in 2026/27 and often pass part of that saving back into the pension. The trade-off: a lower gross salary can reduce mortgage affordability and Statutory Maternity Pay calculations.
