RPSM05101330 - Technical Pages: Contributions and tax relief: Member contributions: Methods of claiming tax relief: Making a contribution under relief at source

Relief at source: making a contribution

An individual will make their contribution after deducting a sum equal to the basic rate of income tax on the contribution. The scheme administrator will then reclaim the equivalent payment from HMRC SPSS (Repayments) and have this credited to the member's registered pension scheme.

Any member can make relievable pension contributions to a registered pension scheme using the relief at source method, i.e. net of basic rate tax, except where

• the member is an employee and the scheme has chosen to operate the net pay arrangement for all its employee members
• the member is a member of a public service pension scheme or marine pilots benefit fund and the scheme does not operate net pay on the contributions and does not choose to operate relief at source, or
• the provider of a retirement annuity contract does not wish to operate relief at source in relation to the contract.

A member entitled to higher rate tax relief will need to claim higher rate tax relief from HMRC, on their Self Assessment return.

Basic rate taxpayer

Margot who wishes to pay £100 per month to her registered pension scheme would only pay a net amount of £80 a month, where the basic rate of tax is 20%.

Higher rate taxpayer

Margot may claim additional relief of £20, if the higher tax liability is 40%, through her Self Assessment tax return.

Where relief is given through the use of the relief at source method, relief may not also be given by using the net pay arrangement.

There are a number of statutory requirements which need to be met before tax relief can be given. These are explained in RPSM05200000.