You will have heard us say before that your pension is incredibly tax-efficient. The contributions you make automatically attract tax relief at 20% (up to certain limits), your investments grow free of Income Tax and Capital Gains Tax, and you have the option to take 25% of your fund tax-free at retirement.

These efficiencies make pension funds a popular choice for acquiring retirement wealth, but it’s important to make full use of the efficiencies that apply to you. Did you know, for example, that you can claim additional tax relief on pension contributions as a high earner?

If you were unaware of this, you’re not alone. Thankfully, though, de Mellow are on hand to help.

Keep reading to find out how.

Understanding tax relief and the Annual Allowance

You can make tax-free contributions to your pension up to certain annual limits. Tax relief is applied automatically at 20% on contributions below 100% of your yearly earnings. But you also need to factor in the Annual Allowance.

It’s also important to note that a different Annual Allowance might apply to you if you are a high earner or you have already flexibly accessed some of your pension benefits.

Annual Allowance

This is the amount you can save into your pension pot each year before tax becomes payable.

For the 2026/27 tax year, it stands at £60,000.

However, you’ll only personally get tax relief on contributions up to 100% of your earnings if your earnings are less than the £60,000 Annual Allowance, or £3,600 – whichever is higher – in each tax year.

Tapered Annual Allowance

If your “threshold income” exceeds £200,000, you might trigger the Tapered Annual Allowance. This reduces your Annual Allowance by £1 for every £2 of income that exceeds the “adjusted income” limit of £260,000.

The reduction could see your allowance – and so your tax-efficient contributions – drop to a minimum allowance of £10,000. Calculating your threshold and adjusted income can be complex, so speak to us if you need help.

Money Purchase Annual Allowance

If you are over the minimum retirement age (currently 55, rising to 57 in 2028), you might have started to withdraw some of your pension funds. Doing so using some “flexible” options could trigger the Money Purchase Annual Allowance (MPAA).

This limits the tax-efficient contributions you can make to just £10,000. It’s important you know which allowance applies to you so that you don’t exceed it and face a tax charge, so contact us if you’re unsure.

Claiming additional tax relief as a high earner

Tax relief is effectively a government top-up to your pension fund designed to encourage retirement saving. As you have read, tax relief is generally applied automatically at the basic rate of 20% using a method known as “relief at source”.

Tax relief is based on your marginal rate of Income Tax. If you’re a basic rate taxpayer, a £100 increase to the value of your pension pot will automatically cost you just £80, and there is nothing for you to do.

As a higher or additional rate taxpayer, your £100 pension payment could cost just:

• £60 (higher rate)

• £55 (additional rate).

This equates to tax relief at your marginal rate of Income Tax, but this entitlement above the standard 20% isn’t applied automatically. Instead, you need to claim the extra 20% or 25% through your self-assessment tax return or directly through HMRC.

Many higher earners are failing to make these claims and could be missing out on tens of thousands of pounds over the decades they spend saving for retirement. For example:

A £12,500 annual pension contribution with tax relief automatically applied (at 20%) would cost just £10,000.

As a higher-rate taxpayer, the same contribution would cost just £7,500 (if you claimed the full £5,000 from the government). This same contribution, made over 20 years with the additional 20% claimed, would amount to an extra £50,000 in your pot.

Making the most of tax efficiencies

The start of a new tax year can be a good time to revisit your finances to ensure your money is working as hard as it can for you. Making the most of the efficiencies offered by wrappers such as your pension and ISAs at the start of a tax year gives your fund longer to benefit from potential investment growth and the effect of compounding.

It is also easy for you to avoid a last-minute rush each April to maximise your and your loved one’s allowances.

You might revisit your plans as part of a financial spring clean, and if you do, be sure to check with your pension provider to see if you have unclaimed tax relief to add to your self-assessment.

Get in touch

Please contact us if you have any questions. De Mellow’s expert financial planners are on hand to help.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available.

The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.

The levels and bases of taxation, and reliefs from taxation, can change at any time.  The value of any tax relief is generally dependent on individual circumstances.

SJP Approved 08/04/2026