Are you missing out on unclaimed tax relief?

10th February 2020

Recent research has highlighted that as many as 80% of higher rate taxpayers are missing out on around £800 million of unclaimed tax relief on their pensions annually. 

Are you missing out on unclaimed tax relief?

A Freedom of Information request from digital pensions service PensionBee uncovered that only 20% of higher rate taxpayers and 43% of additional rate taxpayers who completed self-assessment tax returns in 2017/18 claimed the full amount they were eligible for.

According to the figures, higher rate payers could have missed out on around £769 million, while additional rate payers may have been eligible for £61 million.

The figures don’t include people who completed forms online or over the phone, so the true figures could be much higher, however HMRC has pointed out that many people also call or write to them to claim back the money they are owed.

What relief is available?

Private pension holders are eligible for tax relief on their contributions, worth up to 100% of their annual earnings. Many people will get this relief automatically – for example if your employer takes your contributions out of your salary prior to deducting tax or if you are a basic rate taxpayer (the rules are slightly different in Scotland).

However, there are circumstances where you will need to claim some or all of the relief yourself. You may be eligible to claim further relief if:

  • You are a higher or additional rate taxpayer and your pension providers claims the first 20% for you
  • Your pension scheme is not set up for automatic relief
  • Someone else pays into your pension

Under these circumstances, you can claim for the following additional relief on your private pension contributions:

  • 20% up to the amount of any income you have paid 40% tax on
  • 25% up to the amount of any income you have paid 45% tax on

So, if you earned £60,000 in the 2019/20 tax year, you will have paid 40% tax on £10,000. If you put £15,000 into a private pension, you will automatically get relief on the full amount. You can then claim an additional 20% on the amount you paid the higher rate on, in this scenario £10,000 via your self-assessment tax return.

If your pension is not set up for automatic tax relief you will need to claim the full amount via your self-assessment. If someone else also contributes to your pension (e.g. a partner), you will still get the automatic 20% if your provider claims on your behalf, however if you have a workplace pension that allows other people to make contributions then you should contact HMRC to check if you need to claim.

Contact us

Do you have questions about the amount of tax relief you’re eligible for on your private pension contributions? Get in touch with our team for further support.

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