This is the money the government (HMRC) will put into your pension to encourage and incentivise you to contribute more. It can be called 'tax relief' as it is not really the government's money they are handing out, they are essentially giving some of your tax back.

For example, if you are a ‘basic rate tax payer’ (you earn less than £50,000), you’ll being paying 20% of anything you earn above £12,500 straight to the taxman. In that case, say one month you earn £1,000 – you pay 20% tax (£200), so are left with £800. If you then put that £800 into a pension, you’d get the £200 back as tax relief from the government (straight into your pension pot).

There is a minimum amount everyone is entitled to, no matter what they earn. If you earn less than £12,500, you can pay in £2,880 into a pension and get £720 added by the government. However, you generally can’t get more tax added back than you actually paid on your earnings. So if you won £8,000 on a scratch card and put it all in a pension, you wouldn’t get £2,000 in tax relief unless you had actually paid £2,000 in tax that year.

There's also a maximum limit on tax relief in any one year. If you managed to save £40,000 into a pension in one year (including the government top-up), you wouldn't get any tax relief on further contributions beyond that £40,000.

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