Relief at source

Relief at source is a way of giving tax relief on pension contributions. You pay in from your pay after tax, and your pension provider claims basic rate relief from HMRC and adds it to your pot. According to GOV.UK, it is used by all personal and stakeholder pensions and some workplace pensions.

The relief is 20% of the gross contribution, so every £80 you pay becomes £100. HMRC's Pensions Tax Manual (PTM044220) says Scottish taxpayers also get the Scottish basic rate of 20% added, even if they pay only the 19% starter rate. If you have no earnings, you still get relief on up to £2,880 a year, which becomes £3,600 in the pension.

Higher and additional rate taxpayers get only the first 20% automatically. According to GOV.UK, in England, Wales and Northern Ireland you claim a further 20% on contributions up to the amount of income you paid 40% tax on, and 25% up to the amount taxed at 45%, through Self Assessment or by contacting HMRC.

Example: you pay £4,000 into a personal pension in 2026/27. Your provider adds £1,000, so £5,000 goes in. If at least £5,000 of your income is taxed at 40%, you claim another £1,000, so the £5,000 contribution costs you £3,000. The grossed-up £5,000 also reduces your adjusted net income.

Compare relief at source with the other methods using the pension setting in the UK take-home pay calculator, and read how pension tax relief works.