Calculate the true cost of pension contributions after tax relief. Covers relief at source, net pay and salary sacrifice for England, Wales, Northern Ireland and Scotland.
Last updated: April 2026
Your details
Contribution breakdown
Total into pension (annual)
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-
Your gross contribution -
Tax relief added -
Employer contribution -
Net cost to you (take-home reduction) -
Effective return on your contribution -
Annual allowance remaining -
How pension tax relief works
Pension contributions benefit from tax relief - the government effectively tops up your contributions by refunding the income tax you would have paid on that money. A basic rate (20%) taxpayer contributing £800 net receives £200 tax relief, giving £1,000 in the pension. A higher rate (40%) taxpayer can claim an additional 20% through their Self Assessment return, meaning a £1,000 gross pension contribution costs them only £600 net.
Relief at source versus net pay
There are two main mechanisms. With relief at source (used by most personal pensions and SIPPs), you pay into the pension from your net (post-tax) pay, and the pension provider claims 20% basic rate relief from HMRC and adds it to your pot. Higher rate taxpayers must claim the additional relief via Self Assessment. With net pay arrangements (common in workplace pensions), contributions are deducted before income tax is calculated - you automatically receive full tax relief at your marginal rate without needing to claim separately.
Salary sacrifice
Salary sacrifice reduces your gross salary by the contribution amount before tax and NI are calculated, giving you full income tax and National Insurance relief simultaneously. This is the most tax-efficient method for most employees. Employer NI savings (13.8% of the sacrificed amount) can also be passed on to employees by some employers as additional pension contributions. The downside is that it reduces your official salary, which can affect mortgage affordability calculations and some state benefits that are salary-linked.
Frequently asked questions
The annual allowance is £60,000 in 2026/27 - the maximum total pension input (your contributions plus employer contributions plus any tax relief) that can receive tax relief in a tax year. If you exceed this, an annual allowance charge applies at your marginal rate on the excess. If you have not used your full allowance in the previous three tax years, you can carry it forward and use it in the current year. The tapered annual allowance reduces this limit for very high earners (adjusted income over £260,000) to a minimum of £10,000.
No - your personal contributions cannot exceed your UK earnings in the same tax year (salary, self-employment income, etc.). If you earn £30,000, you can contribute a maximum of £30,000 in personal contributions. Employer contributions do not count against this earnings limit. Non-earners (such as children or non-working spouses) can contribute up to £3,600 gross per year (£2,880 net with basic rate relief added).
HMRC charges income tax at your marginal rate on the amount by which your total pension input exceeds the annual allowance. This charge is reported and paid via Self Assessment. In some cases, you can ask your pension scheme to pay the charge directly from your pension pot (a scheme pays election), which is worth considering if you would otherwise need to sell assets to pay the charge. The annual allowance charge effectively eliminates the tax advantage of the excess contributions.