Pension Tax Relief for Higher-Rate Taxpayers: Do You Need to File a Tax Return?

Written By Rachel Pearson

Many higher-rate and additional-rate taxpayers are missing out on valuable pension tax relief simply because they don’t complete a Self Assessment tax return.
If you earn over £50,270 and pay into a personal pension or workplace pension, understanding how tax relief works can make a significant difference to your retirement savings — and your tax bill.

This guide explains:

  • When higher-rate earners should file a tax return

  • Which pension schemes qualify for extra tax relief

  • How “Relief at Source”, “Net Pay” and “Salary Sacrifice” differ

  • How to check which method your employer uses

  • Why filing a Self Assessment can put money back in your pocket

Why Pension Tax Relief Works Differently for Higher-Rate Earners

All personal pensions receive 20% basic-rate tax relief automatically.
But if you’re a 40% or 45% taxpayer, you’re entitled to another 20% or 25% in additional relief.

Here’s the key point:

You only receive this extra relief if you complete a Self Assessment tax return.

Your pension provider can’t claim it for you — HMRC only applies it through the tax return system or via a tax code adjustment.

Which Pension Schemes Allow You to Claim Extra Tax Relief?

This depends entirely on how the pension receives tax relief.
There are three main methods in the UK:

1. Relief at Source (RAS)

You can reclaim higher-rate tax.

  • Your contribution is taken from net pay (after tax).

  • The pension provider adds 20% tax relief automatically.

  • If you pay higher-rate (40%) or additional-rate (45%) tax, you reclaim the difference through Self Assessment.

Common for:

  • SIPPs (Self-Invested Personal Pensions)

  • Personal pensions

  • Many group personal pensions (GPPs) through employers

Example of extra relief:
You contribute £8,000 → provider adds £2,000 → total pot: £10,000.
If you pay 40% tax, you can claim another £2,000 back via your tax return.

2. Net Pay Arrangement (NPA)

You cannot reclaim extra tax.

  • Contributions are taken from gross pay, before income tax.

  • Taxable income is reduced automatically.

  • Higher-rate relief is applied through payroll.

Common for:

  • Occupational pensions

  • Trust-based schemes

  • Providers such as The People’s Pension or NOW: Pensions (but not exclusively)

Key point:
You already receive full tax relief at source — so there’s nothing to claim later.

3. Salary Sacrifice (Salary Exchange)

Again, you cannot reclaim extra tax.

  • You agree to give up part of your salary, and the employer pays that amount into your pension.

  • Because your salary is lowered, you save income tax and National Insurance.

  • The employer also saves NI, which some pass on as additional pension contributions.

Key point:
There are no employee contributions, so there’s no relief to reclaim.

How Do You Know Which Pension Method You’re On?

This is where many people get confused.
Here’s the easiest way to find out:

1. Look at your payslip

If your contribution is taken before tax is calculated:
→ Net Pay Arrangement (or Salary Sacrifice if your gross salary itself is reduced).

If your contribution is taken after tax:
→ Relief at Source (you may be entitled to extra tax relief).

2. Check your pension welcome pack

Look for wording such as:

  • “Your contributions are deducted before tax” → Net Pay

  • “We claim 20% tax relief from the government on your behalf” → Relief at Source

  • “Salary exchange” / “salary sacrifice” → Employer contributions only

3. Ask payroll or HR

A simple question gets the answer:

“Is our pension operated as Net Pay, Relief at Source, or Salary Sacrifice?”

Payroll must know this to apply the correct tax treatment.

4. Check the provider (general trends)

Not rules, but common patterns:

  • Relief at Source: NEST, Aviva GPP, Scottish Widows personal pensions

  • Net Pay: People’s Pension, NOW: Pensions

  • Salary Sacrifice: Depends on employer, not provider

When Should a Higher-Rate Earner File a Tax Return?

You should consider completing a Self Assessment if:

✔ You pay into a personal pension or a Relief at Source workplace scheme

This is the big one.
If your contributions are made after tax, you can reclaim additional tax relief worth hundreds or thousands per year.

✔ Your adjusted net income is over £50,000 and you:

  • receive Child Benefit

  • need to reduce your adjusted income to restore tax-free allowances

  • want to reclaim personal allowance tapering via pension contributions

✔ You want HMRC to adjust your tax code so you receive relief automatically in future

Filing once can fix your tax code for future years.

Why This Matters for Higher-Rate Taxpayers

Higher-rate relief on pensions isn’t automatic unless your contributions go through payroll under Net Pay or Salary Sacrifice.

If you’re in a Relief at Source scheme and don’t file a tax return, you’re leaving money on the table.

Over a decade, the difference can be tens of thousands of pounds.

As accountants specialising in higher-rate taxpayers, company directors and professionals, we’ll:

  • review your pension tax-relief position

  • tell you whether you should file a Self Assessment

  • check your workplace scheme for unclaimed relief

  • ensure your tax code is correct going forward

If you want to make sure you’re not missing out on valuable tax relief, get in touch and we’ll walk you through it.

Rachel Pearson