Pension tax relief - can you claim more than you pay tax?

[David_M]

I am struggling to find a definitive answer to this despite much searching and reading, so hoping someone on here can help.

Assuming that you get pension tax relief at source, and are (just) a basic rate taxpayer, will you receive more than the amount of tax you pay in a year?

For example (these are examples, not detailed calculations):
- personal allowance is £12,570
- salary is £15,000
- therefore tax paid is at basic rate and is (say) £500
- make a pension contribution of £10,000
- which is grossed up by pension tax relief of £2,500

Clearly the second bold figure is much larger than the first. Will the pension tax credit be capped at the amount paid, or do you get the full 20%?

[isleofthorns]

not qualified to give you an answer, but gut tells me you'd get the 20% uplift / rebate.

non-earners can make pension contributions (albeit limited), and they get the uplift,.... so, in this instance, the tax credit is not linked to tax paid.

[anonymous-user]

David_M said:

I am struggling to find a definitive answer to this despite much searching and reading, so hoping someone on here can help.

Assuming that you get pension tax relief at source, and are (just) a basic rate taxpayer, will you receive more than the amount of tax you pay in a year?

For example (these are examples, not detailed calculations):
- personal allowance is £12,570
- salary is £15,000
- therefore tax paid is at basic rate and is (say) £500
- make a pension contribution of £10,000
- which is grossed up by pension tax relief of £2,500

Clearly the second bold figure is much larger than the first. Will the pension tax credit be capped at the amount paid, or do you get the full 20%?

Yes you can, subject to a maximum of your net relevant earnings.

[irc]

This calculator agrees. And in the notes explains

"Tax relief can only be claimed on contributions up to your earnings (or £3,600 if you’re not working). You must pay sufficient tax at the higher or additional rate to claim the full 40% or 45% tax relief."

https://www.hl.co.uk/pensions/tax-relief/calculato...

[David_M]

Thanks for the various replies - that's what the internet suggested, but it sounded unusually generous.

[mikey_b]

David_M said:

Thanks for the various replies - that's what the internet suggested, but it sounded unusually generous.

It is quite generous. I pay £25 a month into a Junior SIPP for each of my two school-age kids, and each payment I make gets boosted a month or two later by another £6.25 direct from the government. There's no link between that and the tax they pay, which is limited to VAT on whatever they spend their pocket money on.