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Relief at source explained

1 month ago

‘Relief at source’ is the way in which a client receives tax relief on personal pension contributions made to their SIPP. As part of our Bitesize Technical series, Senior Technical Consultant, Lisa Webster, discusses the following points to explain how relief at source works in practice:

  • The rate of tax relief applied under relief at source.
  • The point at which tax relief is received.
  • How clients can claim higher rates of relief.
  • Worked examples.


Watch the bitesize video now or scroll down to read through the key talking points.

Key insights on relief at source

What is relief at source?

Relief at source, or RAS, is the way in which all personal pensions, along with some workplace schemes, receive tax relief on contributions.

What tax relief will the pension scheme claim under relief at source?

When a client makes a contribution to their pension, they pay it net of basic rate tax at 20%. The scheme administrator will claim the 20% back from HMRC, and apply it to your client’s pension account. This means that to get £100 into a pension, £80 is paid in and £20 comes from HMRC.

How long can it take for tax relief to be applied to your client’s account?

Depending on when in the month the contribution is made, it can take between seven and eleven weeks for the tax relief to be applied to their account.

What about clients who pay more than 20% tax?

The tax relief will always be applied at 20% (the current basic rate of income tax at the time of publishing), regardless of the tax rate your client actually pays. Any client who has paid tax on their earnings at a rate higher than 20% can claim the extra tax back, usually via self-assessment. It’s important to note that clients who pay less tax don’t have to repay the difference.

Can non-taxpayers get tax relief on contributions?

The basic principle of tax relief on pension contributions is that clients get back the tax they’ve paid, but there is an anomaly at the lower end of the scale. If contributions are made from income that tax isn’t due on, such as within the personal allowance, then they still get the 20% tax relief under relief at source.

How much can clients contribute and receive tax relief?

Under relief at source, personal pension contributions can be made up to 100% of UK relevant earnings in the tax year the contribution is made. There’s also a basic amount of £3,600 that any UK resident under the age of 75 can contribute and get tax relief on, even if they have no earnings at all. £3,600 is the gross amount, so clients who are non-earners can pay in up to £2,880 net.

Also, Scottish taxpayers who pay the starter rate of tax, currently 19% at time of publishing, do not have to pay back the 1%.

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Lisa Webster

Lisa Webster

Job Title
Senior Technical Consultant

Lisa is an Economics graduate who has been in the financial services industry since 2003. Prior to joining AJ Bell in 2014 she spent nine years working in senior technical and consultancy roles at a major SIPP and SSAS provider. Lisa is part of our Technical Team, responsible for providing regulatory and technical analysis to the business and outside world. She is also a regular speaker at adviser events.

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