Relief at Source
A method of pension tax relief where you contribute from your net (after-tax) pay and the pension provider claims basic-rate tax relief of 20% directly from HMRC, topping up your pension automatically. Higher- and additional-rate taxpayers must claim any extra relief above the basic rate through Self Assessment or by contacting HMRC. Many personal pensions, SIPPs, and some workplace schemes operate on this basis.
How it works
When you pay into a relief-at-source pension, your contribution is deducted from your net, after-tax pay, and the pension provider then submits a claim to HMRC for the basic-rate top-up on your behalf, adding it to your pot once approved. This is different from a net pay scheme, where the contribution comes out of your gross pay before tax is calculated, so relief is automatic and immediate at whatever rate you actually pay.
One important feature of relief at source is that even non-taxpayers can receive the basic-rate top-up on limited contributions, because the relief is added regardless of whether tax was actually paid on that income — net pay schemes cannot offer this since there was no tax to relieve in the first place.
Many personal pensions and SIPPs operate on a relief-at-source basis, and some workplace schemes do too. Higher- and additional-rate taxpayers using this method must still separately claim the relief above the basic rate through Self Assessment or by contacting HMRC.
Example: reaching a £500 pension contribution via relief at source
To end up with £500 in the pension, a basic-rate taxpayer pays £500 × 80% = £400 from their net pay.
The pension provider then claims the remaining 20% — £100 — directly from HMRC.
£400 + £100 = £500 lands in the pension in total.
Frequently asked questions
How long does it take for the top-up to be added?
Providers typically claim and add the basic-rate relief within a few weeks of receiving your contribution, though exact timing varies between pension providers.
Can non-taxpayers benefit from relief at source?
Yes, relief-at-source schemes add the basic-rate top-up even if you didn't actually pay tax on that income, which net pay schemes cannot do since there was no tax deducted to relieve.
Do I have to do anything to receive the basic 20% relief?
No, the provider claims and adds it automatically; you only need to take action if you're a higher- or additional-rate taxpayer wanting to claim relief above the basic 20% rate.
Related Terms
Pension Tax Relief
A government top-up on pension contributions that effectively returns income tax paid on the contributed amount, making pensions a highly tax-efficient saving vehicle.
Salary Sacrifice
An arrangement where you give up part of your salary in exchange for a non-cash benefit such as employer pension contributions, a cycle-to-work scheme, or an electric car.
Annual Allowance
The maximum amount you can contribute to registered pension schemes each tax year while still receiving tax relief, currently set at £60,000.
Self Assessment
The system by which individuals report their own income, gains, and reliefs to HMRC each year through an online or paper tax return, rather than having tax collected automatically under PAYE.
Try the calculator
Use our free tool to see how relief at source affects your tax.