Tax relief on pension contributions applies to which of the following?

• A. Only employer contributions
• B. Only employee contributions
• C. Both employer and employee contributions
• D. Neither

Answer: (C)

Tax relief is available on qualifying pension contributions from both sides of the payroll. When you contribute personally to a pension, you receive tax relief to incentivize saving—usually added at source by the provider (basic rate relief) with the option to claim extra relief if you’re higher-rate or additional-rate taxpayer. This boosts the amount going into your pension from your own contributions.

At the same time, an employer can contribute to an employee’s pension. Those payments are treated as a business expense and are deductible for corporation tax, so the employer benefits from tax relief and the employee’s pension fund grows accordingly. The employee doesn’t receive a separate tax deduction at the moment of contribution, but the overall pension fund is enhanced.

Both types of contributions are subject to the relevant pension contribution limits (annual allowance, lifetime allowance), but tax relief is available for each.