Tax relief is one of the biggest benefits of saving into a pension. Here's how it works.
What is tax relief?
When you contribute to a pension, the government adds extra money through tax relief. This is money you would have paid in tax, redirected to your pension instead.
How much tax relief do you get?
The amount depends on your income tax rate:
Basic rate taxpayers (20%): Get 20% tax relief automatically
Higher rate taxpayers (40%): Get 20% automatically, plus can claim another 20% through self-assessment
Additional rate taxpayers (45%): Get 20% automatically, plus can claim another 25% through self-assessment
How it works at Chest
When you make a contribution to Chest, here's what happens:
You contribute £80 from your bank account
Chest claims £20 in tax relief from HMRC on your behalf
£100 is invested in your pension
So for every £80 you put in, you get £100 in your pension. That's an instant 25% boost.
When is tax relief added?
Basic rate tax relief is usually added to your pension within 6-8 weeks of your contribution. You can track its status in your transaction history.
Higher and additional rate relief
If you pay 40% or 45% tax, you can claim back the extra relief through your self-assessment tax return. You won't see this as an addition to your pension – instead, it reduces your tax bill or increases your tax refund.
Tax relief on cashback
Cashback contributed to your pension on your behalf may also be eligible for tax relief. Basic rate tax relief (20%) is claimed automatically by Chest – so if you earn £10 in cashback, it could become £12.50 in your pension. Higher and additional rate taxpayers may be able to claim further relief through self-assessment.
Non-taxpayers
Even if you don't pay income tax, you can still get 20% tax relief on contributions up to £2,880 per year. That means you can contribute £2,880 and have £3,600 in your pension.
Still need help?
If you have questions about tax relief, contact us at hello@joinchest.com. For specific tax advice, we recommend speaking to a tax adviser.