Are You Claiming All Your Tax Relief?

02/10/2013

Just over a quarter of workers earning more than £41,450 fail to claim the full 40% tax relief they are entitled to on pension contributions, according to research from Prudential.

The provider said the average higher rate taxpayer is missing out on £1,255 a year in pension tax relief, with an estimated 182,500 taxpayers affected.

It urged higher earners to check whether they are claiming their full entitlement and investigate if they have missed out in the past. Those who fill in an annual tax return can make claims for contributions paid as far back as the 2011/12 tax year while those who do not fill in tax returns can claim as far back as the 2009/10 tax year – but the deadline is 31 October.

Prudential’s tax expert Clare Moffat said: “Failing to claim higher rate pension tax relief can have a major impact on income and it is clear that a substantial number of higher rate taxpayers are not claiming the relief they are entitled to.

There cannot be many people who would happily give up as much as £1,255 a year and substantial numbers of higher rate taxpayers can take action now to significantly improve their pension pots.

The good news is that it is possible to reclaim tax relief you have missed out on and that claims can be backdated for up to three tax years if you do not fill in a tax return yourself.”

Members of occupational pension schemes receive basic and higher rate tax relief automatically through their payroll. But members of personal pension schemes, including group personal pension schemes, self-invested personal pensions and stakeholder pensions, only receive basic rate 20% tax relief automatically.

They need to claim the additional relief through their annual tax return or by informing HM Revenue & Customs, Prudential said.

The research found 59% of respondents said they did claim all the pension tax relief they were entitled to and that around 60% of higher rate taxpayers paying into defined contribution schemes do fill in tax returns themselves.

If you would like more information about your own pension or tax planning situation, please contact us >>

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