2026/27 tax year

Pension Tax Relief on a £25,000 Income 2026/27

With a £1,200 gross contribution under relief at source, total pension tax relief is £240. Net cost to you: £960 (£80/month). Under salary sacrifice, the effective cost drops further to £864.

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Results — £25,000 income, £1,200 contribution

Relief at source

Gross contribution

£1,200

Total relief

£240

Net cost

£960

Marginal rate

20%

Basic rate relief (20%) £240

Higher rate extra relief £0

Monthly net cost £80/month

Salary sacrifice

Gross contribution

£1,200

Total tax relief

£240

Net cost (incl. NI)

£864

Marginal rate

20%

Tax relief (income tax) £240

Employee NI saving £96

Employer NI saving £180

How relief works at £25,000

Which tax band applies and what relief you get

On a £25,000 income you are a basic-rate taxpayer paying 20% income tax. Your marginal income tax rate is 20%.

Under relief at source, your provider claims the full 20% basic rate relief automatically from HMRC — no Self Assessment needed. Total relief on a £1,200 contribution is £240.

Under salary sacrifice, your gross salary is reduced by £1,200 before income tax and National Insurance are calculated. This saves you income tax and employee NI (saving an additional £96), bringing your effective net cost down to £864. Your employer also saves NI of £180 — some employers pass this saving into your pension.

Other income levels

£20,000 £25,000 £30,000 £35,000 £40,000 £45,000 £50,000 £60,000 £75,000 £100,000 £120,000 £150,000

Figures are estimates for the 2026/27 tax year, England/Wales/NI, using a 5% contribution scenario. Results are not financial or tax advice. Consult a qualified adviser for personal guidance. GOV.UK pension tax relief · Methodology