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Income Tax and Pension Relief Modeller
Salary, savings, dividends and rent are taxed at different rates and in a set order. This works out what your contribution is really worth
Income Tax and Pension Relief Modeller · 2026/27
How much tax relief will your pension contribution actually earn?
Most relief calculators assume every pound you earn is salary. This one takes each type of income separately, because savings and dividends are taxed on their own rates and in their own order.
Uses 2026/27 rates for England, Wales and Northern Ireland. Scottish income tax bands differ.
What the contribution earns you
Your tax, by type of income
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Illustrative only, not financial advice. Uses 2026/27 rates and bands for England, Wales and Northern Ireland. Scottish income tax bands differ. Income is taxed in the statutory order: other income first, then savings, then dividends. Assumes the contribution is within your annual allowance and your relevant UK earnings. National Insurance savings under salary sacrifice are not included.
Why most relief calculators get this wrong
Almost every pension relief calculator assumes all of your income is salary. If you have savings interest or dividends, that assumption produces the wrong answer.
The reason is the order. Income tax is applied to other income first, then to savings, then to dividends. Each layer has its own allowances and its own rates.
So a pension contribution does not simply earn relief at your headline rate. It can move dividends down a band, restore personal allowance, or free up your savings allowance. Sometimes it does all three.
This modeller takes each type of income separately, applies them in the statutory order, and shows the tax with and without your contribution. The difference is your real relief.
What it accounts for
The order of taxation. Employment, self-employment, rental and pension income are taxed first. Savings interest comes next, then dividends last.
The starting rate for savings. Up to £5,000 of interest can be taxed at 0%, but the band shrinks as your other income rises. It disappears entirely above £17,570.
The personal savings allowance. £1,000 at basic rate, £500 at higher rate, and nothing at the additional rate. Your contribution can move you between them.
The 60% band. Between £100,000 and £125,140 the personal allowance is withdrawn. A contribution that pulls your adjusted net income back through that band earns relief at 60%.
How the contribution is made. Relief at source, net pay and salary sacrifice all behave differently, and the modeller handles each.
Relief at source
You pay from your bank account and the provider adds 20%. Anything above basic rate has to be claimed through Self Assessment. Claims can go back four tax years.
Net pay
Taken from salary before income tax, so full relief is immediate. Common in large employer and public sector schemes. Nothing to claim.
Salary sacrifice
You give up salary and your employer pays it in instead. Relief is automatic and National Insurance is saved on both sides. Not shown in the figures here.
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Questions about tax relief on pensions
Why does savings interest change my pension relief?
Savings are taxed after your other income, using the starting rate band and the personal savings allowance. A pension contribution can push savings back into a lower band, or restore an allowance you had lost.
Do dividends get pension tax relief?
Not directly. Pension contributions extend your basic and higher rate limits. Dividends are taxed last, so a contribution can move dividend income into a lower rate.
What is the 60% tax band?
Between £100,000 and £125,140 the personal allowance is withdrawn at £1 for every £2 of income. That produces an effective rate of 60%, and relief at the same rate.
How do I claim higher rate relief?
Through Self Assessment, or by asking HMRC to change your tax code. Only the basic 20% arrives automatically on a relief at source contribution.
Can I claim relief for previous years?
Yes. Claims for unclaimed higher rate relief can usually go back four tax years. It is worth checking if you have never claimed.
Does this cover Scotland?
No. Scottish taxpayers have different income tax bands and rates on non-savings income. Savings and dividend rates are the same across the UK.
Is there a limit on what I can contribute?
Yes. The annual allowance is £60,000 for most people, and you cannot get relief on more than your relevant UK earnings. High earners may have a tapered allowance.
Reviewed by
BSc, MLIBF, PETR, Chartered ALIBF · Co-Founder and Chartered Associate
Chris has spent over a decade in financial planning and specialises in research and technical analysis. He checks every figure and calculation on this page before it is published.
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