Failing to Claim Tax Relief Costs Tax Payers Millions

An estimated £230 million is being missed out on by higher rate tax payers failing to claim tax relief on their pension contributions. Research found that a quarter of higher rate taxpayers, who pay contributions into ‘money purchase’ pension schemes, fail to claim the full relief that they’re entitled to.

For those in the higher tax bracket, pension savings can be topped up to 40% through tax relief. For example, a contribution of £100 would only cost them £60.

For higher rate tax payers, tax relief should be given automatically through the PAYE system. The problem arises when not every occupational pension scheme will do this. Some occupational pensions operate as Group Personal Pensions and stakeholder schemes, in which only 20% of tax relief is presented automatically. Individuals are therefore unaware they are missing out on a further 20% worth of tax relief.

In order to claim the further 20%, those involved need to complete an annual self-assessment tax return, or can call HMRC to get back previously unclaimed relief.

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