The tax top-up you receive on your pension contributions depends on your tax bracket. Here’s a breakdown of how it works:    

Basic Rate Taxpayers (20%):  

If you’re a basic-rate taxpayer, the government automatically adds a 20% top-up to your pension contributions. For example, for every £80 you invest,  the government will top it up to £100.    

Higher Rate Taxpayers (40%):  

Higher-rate taxpayers can claim an additional 20% tax relief through their  self-assessment tax return, making the total tax relief 40% (20%  automatically added + 20% claimed back).    

Additional Rate Taxpayers (45%):    

If you’re an additional-rate taxpayer, you can reclaim even more through  self-assessment, bringing your total relief to 45%.    

Important Note: If you contribute through a limited company (i.e., as a business expense), you won’t receive personal tax top-ups. Instead, these contributions reduce  your company’s corporation tax.    

Why These Percentages?    

Tax relief is based on pre-tax earnings. For basic-rate taxpayers, £80 contributed from take-home pay would have been £100 before tax, which explains why the government adds £20 - effectively making it a 20% top-up on  the net amount. This is one of the ways the government aims to help people save for their  future, by incentivising it.  

Tax relief rules may vary depending on individual circumstances, and future rates may change based on UK tax regulations.