Higher rate taxpayers missing out on 230m pensions tax relief


Many higher rate taxpayers with personal pensions are failing to claim higher rate tax relief on their pension contributions according to new research.  

A study carried out by Prudential has found that 25% of higher rate tax payers on money purchase schemes are failing to claim their full tax relief, meaning around £230 million is unclaimed each year.

It is estimated that more than 180,000 higher rate tax payers could be failing to claim, although the actual figure could be even higher than £230million since 15% of higher rate taxpayers surveyed by Prudential said they were unsure whether or not they were claiming the extra relief.

Prudential spokesperson 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 relief they are entitled to.

'It can be worth as much as £1,255 a year and there cannot be many people who would happily give up as much. Substantial numbers of higher rate taxpayers can take action now to significantly improve their pension savings.'

Those in the higher rate tax bracket can top up their pension savings by 40% through tax relief, so that a £100 contribution to their pension pot only costs them £60.

Higher rate taxpayers on workplace pension schemes should receive their tax relief automatically through their payroll, but not every occupational pension will do this.  Some operate as Group Personal Pension and stakeholder schemes, which only provide 20% tax relief automatically, meaning some people on workplace pensions may be unaware they are not getting their full entitlements.

Those with individual personal pensions meanwhile, such as SIPPs and stakeholder pensions, will also have to claim back the extra 20%.

In order to claim the amount owed, individuals will need to fill out an annual Self-Assessment Tax Return, or call HM Revenue & Customs to get back previously unclaimed relief.

Those who have not claimed their relief in previous years can still do so, as the Government allows those who fill out annual tax returns to claim back relief on contributions dating back to the 2011/12 tax year.

Individuals who don’t normally complete tax returns can claim as far back as 2009/10, though they must submit their claims before October 31st.  After this date they can only claim back as far as 2010/11.

 


  • Date posted:
    18/10/2013
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