The majority of those earning over £50,270 fail to claim the extra 20–25% pension tax relief they’re entitled to, simply because it doesn’t happen automatically. As a result, those workers could be losing hundreds or even thousands of pounds annually.

Pension contributions are one of the most tax-efficient ways to save for retirement. Basic-rate taxpayers automatically receive 20% tax relief on contributions, but higher-rate (40%) and additional-rate (45%) taxpayers must claim the remainder themselves. Many simply don’t, missing out on hundreds or even thousands of pounds in potential relief.

According to Chris Eastwood, CEO and co-founder of Penfold: “With HMRC now offering a streamlined online claims process and allowing claims to be backdated for up to four years, higher-rate taxpayers must check whether they’re leaving free money on the table.”

How can workers get pension tax relief from HMRC?

When you contribute to a pension, the government refunds the income tax paid on that contribution, up to the annual allowance of £60,000 or 100% of your earnings.

For basic-rate taxpayers, this happens automatically:

  • Contribute £80
  • Government adds £20
  • £100 goes into your pension pot

For higher-rate taxpayers, the automatic 20% addition only covers part of the relief. The remaining tax relief must be claimed directly from HMRC.

Potential Savings Example

Sam, who earns £53,000, wants to contribute £5,000 to her pension:

  • Automatic 20% relief adds £1,000
  • Additional higher-rate relief of £546 can be claimed
  • Total pension benefit: £5,000 for a net cost of £3,454
  • For those earning £55,270 or more, full 40% relief applies, reducing the cost of a £5,000 contribution to just £3,000.

Chris says: “As of 2025, HMRC has introduced a streamlined online service, replacing the older, slower manual claims process.

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“Taxpayers can now claim higher-rate or additional-rate relief via the HMRC online service or through their Self-Assessment tax return.

“Eligible individuals can even backdate claims for up to four previous tax years.

“Most workplace pensions automatically apply tax relief at your highest rate, depending on contribution arrangements such as net pay, relief at source, or salary sacrifice. Where this does not happen, employees can still claim extra relief themselves.”