Do I Need to Declare Payments into a Private Pension on my Tax Return?

Reporting payments you make into a private pension isn’t compulsory, but including the details of any contributions on your tax return might mean you’re able to claim more tax relief.

In this article we explain the tax-saving benefits of mentioning your pension contributions when you file your tax return.

Do I need to have a private pension when I’m self-employed?

Self-employed people don’t have to set up a pension, but putting money aside into a pension pot is a great (and tax-efficient) way to plan and save for the future.

Getting tax relief on your pension contributions

Most people in regular employment are automatically enrolled into a pension scheme by their employer, who will then also make pension contributions alongside the employees’ own.

As a self-employed person you don’t have that same luxury, so the government decided to step in by providing tax relief on the contributions you pay into a personal pension.

How much tax relief will I get?

Many pension providers will claim the basic rate of tax relief on your behalf every time you deposit a payment into your private pension pot. This is known as ‘relief at source’ and will be paid into your pension fund by the government.

If your pension scheme isn’t set up for automatic tax relief, or if you’re a higher earner paying more than the basic rate of tax, you could be claiming additional tax relief on your contributions each time you submit your Self Assessment.

If I’m a higher rate taxpayer will I get 40% tax relief on all my contributions?

No, sadly not! You’ll only get 40% tax relief on the portion of your pension contributions that sit within the higher rate tax bracket.

Plus, if your pension provider already automatically claims the 20% basic rate, then when you send your tax return you’ll only be able to claim the difference between what they claim and your tax rate – so you’ll claim an additional 20%.

This can only happen if you report your pension contributions on your tax return. If you don’t declare your pension payments, HMRC won’t know to give you any tax relief on them.

Tax relief on pension contributions in England, Wales, and Northern Ireland:

You’ll get 20% tax relief on the portion of your pension contributions within the basic rate tax bracket (£12,571 - £50,270). Then, if you pay Income Tax at a rate above that, you can claim:

• A further 20% on the chunk of contributions you’ve paid 40% tax on (so that’s anything in the higher rate tax bracket, which is £50,271 - £125,140)
• 25% on contributions which were taxed at 45% (which applies to earnings £125,140 upwards)

Tax relief on pension contributions in Scotland:

In Scotland you’ll get 20% tax relief on the part of your pension contributions within the UK basic rate bracket which is £12,571 - £50,270 (even if you pay the 19% starter rate on your earnings!). Then, if you use Scottish Income Tax rates which are above 20%, you can claim:

• An extra 1% on contributions you paid the intermediate 21% tax on
• 22% on income taxed at 42%
• 25% on income taxed at 45%
• 28% on income taxed at 48%

What if I didn’t pay any tax?

You might still be able to get 20% relief on contributions you make into a private pension – up to £2,880 per year – even if you earn less than the £12,570 Personal Allowance.

Is the amount of pension relief capped?

The Annual Allowance means you can make up to £60,000 of contributions into a personal pension scheme every year before you need to start paying tax on them.

How do I declare personal pension contributions on my tax return?

Your Self Assessment tax return will include a heading which deals with ‘tax reliefs’. Find the section that says ‘payments to registered pension schemes where basic-rate tax relief will be claimed by your pension provider’.

Your pension provider will normally send an annual statement, and you can use this information to enter the value of your pension contributions so HMRC can work out how much tax relief you are entitled to.

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