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60% tax relief on individual pension contributions.

As some will know, your Personal Allowance (£12,500 in England and Wales in 2020/21) is reduced by £1 for every £2 you're lucky enough earn over £100,000 pa.

This means that if you earn over £125,000 you'll have no Personal Allowance.

However, if you make a PERSONAL contribution to pension - or enter into a Salary Exchange / Salary Sacrifice arrangement - your income is deemed to reduce by the amount of that contribution.

What this means is, making a (gross) contribution of £25,000 will not only be eligible for tax relief at 40%*, but it reduces your income to £100,000.

This means your Personal Allowance will be available, and whereas you'd have been taxed at 20% from the very first pound you earned, the first £12500 will be free of tax. saving 20% tax on that amount.

40% plus 20% = 60%.

Which is nice.

If you find yourself in that income bracket and have spare cash with the end of the tax year approaching, this could be incredibly valuable

*Its VITAL to note that if you're a Higher or Additional Rate taxpayer, you will need to claim tax relief in excess of Basic Rate. HMRC will not chase you..
 

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