How to make the most of a valuable government incentive
One of the most generous tax breaks available in the UK is pension tax relief — yet many people don’t fully take advantage of it.
How it works:
- When you pay into a pension, the government adds 20% basic-rate tax relief automatically.
- Higher and additional-rate taxpayers can claim even more via their tax return.
- For example, a £800 contribution becomes £1,000 instantly for a basic-rate taxpayer.
Why it’s powerful:
- It’s effectively free money from the government.
- It boosts your contributions without increasing your out-of-pocket cost.
- Over time, the extra growth on this “free” top-up can be significant.
Action step: Check your contribution level and tax band. If you’re a higher-rate taxpayer and haven’t claimed the extra relief, you may even be able to backdate your claim for up to four years.
