In a relief at source pension the scheme adds tax relief at the rate HMRC tells it applies to the member; for a Scottish taxpayer that is the Scottish basic rate, which is 20% for 2026 to 2027. Starter rate taxpayers keep the full 20% even though they only pay 19%. Intermediate, higher, advanced and top rate taxpayers must claim the rest themselves, and the relief is given by stretching their Scottish rate bands by the gross contribution, which is worth an extra 1%, 22%, 25% or 28%.

This page looks at the Scottish mechanics: how schemes learn a member’s status, what happens when they get it wrong, and how the band extension produces the extra relief. For the difference between scheme types, see relief at source vs net pay; for the general claims process, see claiming higher rate relief on pension contributions.

Which rate does the scheme use?

Section 192(1) of the Finance Act 2004 lets the member deduct and keep tax on the contribution “at the relevant rate”. Section 192(1A) defines that rate as:

  • the Scottish basic rate, if HMRC notifies the scheme administrator to use it;
  • the Welsh basic rate, if HMRC notifies the scheme to use that instead;
  • the UK basic rate in all other cases.

The scheme then reclaims the deducted tax from HMRC and adds it to the pot, and the member’s gross contribution is the figure used for every other tax purpose. For 2026 to 2027 the Scottish basic rate and the UK basic rate are both 20%, so a member who pays £80 ends up with £100 in the scheme whichever rate is used. The distinction is built into the law so that relief would follow the member’s own country if the basic rates ever diverged.

How does a scheme know a member is Scottish?

Schemes must use the residency status HMRC gives them, not their own address records. HMRC’s guidance for scheme administrators sets out the process:

  • Annual report. Each January HMRC makes an annual notification of residency status report available through its secure file transfer service, based on the scheme’s previous annual return of individual information. It must be downloaded within 6 days. The status column shows S for Scottish, C for Welsh, blank for England and Northern Ireland, and U where the member could not be matched to a National Insurance number.
  • Look up service. For members not on the report, the scheme uses HMRC’s online look up service with the member’s name, National Insurance number and date of birth. Searches made between mid January and 5 April also return next year’s status.
  • Default. If no status is available when relief is first claimed, the scheme must use “rest of UK”. Members under 16, and members aged 16 or over with no National Insurance number, are also treated as rest of UK.
  • Fixed for the year. Once a status has been used to claim relief, the scheme must keep the same rate for the whole tax year, even if a later report or search shows a different status.

HMRC notes that it can take up to two tax years for a new member to appear on the annual report. If a member ends up with the wrong relief, HMRC says it will contact the member directly to correct it, not the scheme.

What happens if the wrong rate was used?

Two sections tidy up mismatches through the member’s own tax calculation. Under section 192A, a Scottish taxpayer whose scheme used a rate lower than the Scottish basic rate gets a tax reduction equal to the shortfall. Under section 192B, if the scheme used a rate higher than the Scottish basic rate, the excess is treated as tax the member owes for that year. Welsh and rest of UK members have parallel rules. With both basic rates at 20% in 2026 to 2027, neither section produces any adjustment this year, but they explain why a status change after you move does not need the scheme to reopen past claims.

Do starter rate taxpayers have to pay anything back?

No. GOV.UK states that if your Scottish rate is 19%, your provider claims relief at 20% and you do not need to pay the difference. The same applies to members who pay no tax at all: the provider can claim 20% on contributions up to 80% of earnings in the year, or up to £2,880 if there are no earnings.

How is relief above 20% given?

Section 192(4A) applies where a Scottish taxpayer has income taxed at a Scottish rate higher than the Scottish basic rate. On a claim, the Scottish basic rate limit and every Scottish rate limit above it are increased by the gross contribution. Every band from basic upwards moves up by the same amount, so slices of income drop into a cheaper band at each boundary the member’s income crosses.

GOV.UK expresses the result as extra relief to claim:

Highest Scottish rate paid Extra relief on contributions up to the income taxed at that rate Total relief including the 20%
Intermediate, 21% 1% 21%
Higher, 42% 22% 42%
Advanced, 45% 25% 45%
Top, 48% 28% 48%

The 22% at the higher rate is not 42% minus 20% by accident: it combines 21 points from moving income out of the 42% band into the 21% band with 1 point from moving income out of the 21% band into the 20% band. See Scottish Income Tax rates and bands for the thresholds.

What does the band extension look like in numbers?

Illustration only. Both members live in Scotland, have the standard Personal Allowance and no other income in 2026 to 2027. HMRC’s PAYE table gives the Scottish bands above the allowance as: starter to £3,967, basic to £16,956, intermediate to £31,092, higher to £62,430.

Isla, salary £55,000

Her taxable income is £42,430, of which £11,338 is taxed at 42%. She pays £4,000 into a personal pension and the provider adds £1,000, making £5,000 gross.

  • Her claim raises the basic rate limit from £16,956 to £21,956 and the intermediate limit from £31,092 to £36,092.
  • £5,000 moves from 21% to 20%, saving £50. Another £5,000 moves from 42% to 21%, saving £1,050.
  • Her tax falls from £11,082.05 to £9,982.05, a reduction of £1,100, which is 22% of £5,000. With the £1,000 added at source, total relief is £2,100, or 42%.

Callum, salary £40,000

His taxable income is £27,430, of which £10,474 is taxed at 21%. He pays £2,400 and the provider adds £600, making £3,000 gross. His claim moves £3,000 from 21% to 20%, saving £30. Small, but it is only given if he claims.

How do you make the claim?

If you file a Self Assessment return, GOV.UK says you must claim on the return, for the current year and any earlier year. If you do not, HMRC’s online service for claiming relief on private pension payments is open to intermediate and higher rate taxpayers, and is used to give relief through your tax code for the current year. You need your National Insurance number, the pension type and provider, the net amount paid in each year, and proof such as a provider statement. Agents, and anyone unable to use the online service, claim by letter. HMRC says it will review the claim and contact you within 28 working days.

What mistakes do people make?

  • Ignoring the intermediate rate. The 1% is easy to overlook, and HMRC will not give it without a claim.
  • Entering gross figures where net is asked for. The online service asks for the net amount paid.
  • Assuming the scheme’s status settles your tax. The scheme’s rate is fixed for the year; your actual status under the Scottish taxpayer tests decides your final liability.
  • Claiming on net pay contributions. Contributions taken from gross pay already have full relief.

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Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.