Tax relief is a reward from the government for saving for retirement. When you contribute to a SIPP, some of your money that would have gone to the government as tax goes to your pension instead. Tax relief is paid on your pension contributions at the highest rate of income tax you pay. Tax relief on SIPP withdrawals There are rules around making a tax-free withdrawal from your SIPP and then making a contribution into the SIPP with that money to claim tax relief. This is known as ‘pension recycling.’ The rules – which are designed to stop the systematic exploitation of pension tax rules to generate artificially high amounts of tax relief – are quite complex. To decide whether your contributions have been significantly increased, HMRC will examine how much you might have contributed to your SIPP if tax-free cash from withdrawals had not been received and compare this to your actual contributions. You can find more information on pension recycling rules.