SIPP Tax Relief Explained: How to Get 20%–45% Back on Contributions

By Team SalaryCalculate · 7/10/2025

A Self-Invested Personal Pension (SIPP) offers powerful tax benefits, making it one of the most effective ways to save for retirement in the UK. In this guide, we’ll explain how SIPP tax relief works, how much you can claim back based on your income, and how to make the most of your contributions.

What Is SIPP Tax Relief?

Tax relief on SIPP contributions means the government refunds some of the tax you’ve already paid on your income, boosting your pension pot. The relief is based on your marginal income tax rate:

Income Tax Band	Effective Tax Relief
Basic Rate (20%)	20%
Higher Rate (40%)	40% (20% + 20%)
Additional Rate (45%)	45% (20% + 25%)

The first 20% is added to your pension automatically (known as "relief at source"). If you're a higher or additional rate taxpayer, you can claim extra relief via Self Assessment.

Example: How It Works

Let’s say you contribute £8,000 to your SIPP. HMRC automatically adds £2,000 in tax relief (20%), so £10,000 goes into your pension.

If you're a higher rate taxpayer (40% total relief), you can claim back another £2,000 through your tax return — meaning your actual cost is £6,000 for a £10,000 contribution.

How to Claim Higher or Additional Rate Relief

You must file a Self Assessment tax return to claim the extra relief above 20%:

Contribute to your SIPP — your provider claims the basic rate automatically.
Submit your Self Assessment — include your gross contributions (your contribution + the 20% relief).
HMRC adjusts your tax bill — via refund or reduced future payments.

Learn more: GOV.UK – Claim tax relief on pension contributions

How Much Tax Relief Can You Get?

You can get tax relief on contributions up to:

100% of your earnings (up to the annual allowance, usually £60,000 in 2024/25)
£3,600 per year if you have no income (e.g. non-working spouse)

Check: GOV.UK – Annual allowance

Tapered Annual Allowance: If your total income exceeds £260,000, your annual allowance may reduce to as low as £10,000.

Smart Tips to Maximise SIPP Tax Relief

Use carry forward: You can use unused allowance from the previous 3 tax years.
Plan before April 5th: Contributions are counted against the tax year when made.
Pension for a spouse: Contribute to your partner’s SIPP if they have no or low earnings (up to £2,880 net = £3,600 gross).
Salary sacrifice: Combine SIPP contributions with salary sacrifice for additional NI savings. See: Salary Sacrifice vs SIPP(when published)

Common Mistakes to Avoid

Forgetting to claim higher/additional rate relief via Self Assessment
Exceeding the annual allowance (results in tax charge)
Not considering the lifetime allowance removal — while it’s been abolished (as of 2023), other limits like lump sum caps still apply

Summary

SIPP tax relief is one of the best legal ways to reduce your tax bill and grow your retirement savings faster. With up to 45% tax relief available, smart planning can dramatically boost the value of every pound you invest.

Disclaimer: This article is for informational purposes only and does not constitute financial advice. Speak to a qualified adviser before making pension decisions.