ALLOW me to get to the heart of what this blog is about…

Higher or additional rate earners can claim additional tax relief of either 20% or 25% from pension contributions made in the tax year.

Here’s how to claim:

1. Check Your Tax Bracket: Higher rate taxpayers in the UK are eligible for 40% tax relief on pension contributions. Additional rate taxpayers are eligible for 45% tax relief.
2. Contributions from Net Income: If you’re contributing to a pension scheme that operates under the relief at source method (most workplace pensions and personal pensions where private contributions are being made), your contributions will be taken from your net income after tax has been deducted. The pension provider then claims basic rate tax relief (20%) from HM Revenue & Customs (HMRC) and adds it to your pension pot automatically. Additional relief will not be available for contributions being made into workplace pensions via salary sacrifice or net pay arrangements as the relief is already provided through the deductions during payroll.
3. Claiming Additional Tax Relief: To claim the additional tax relief for higher rate taxpayers (40% or 45%), you need to include your pension contributions on your annual tax return. You can claim the difference between the basic rate tax relief claimed by your pension provider and your higher rate of tax.
4. Through Self-Assessment: If you’re not already in self-assessment, you may need to register for it to claim the additional tax relief. You can do this through the HMRC website or by contacting HMRC directly.
5. Declare Pension Contributions on Tax Return: On your tax return, there will be a section where you can declare your pension contributions. You’ll need to enter the total gross amount of your contributions (including the basic rate tax relief already claimed by your pension provider).
6. Receive Tax Relief: Once you’ve submitted your tax return, HMRC will calculate the additional tax relief you’re entitled to based on your tax bracket. This additional relief will either reduce the tax you owe or increase any tax rebate you’re entitled to.
7. Keep Records: Make sure to keep records of your pension contributions and any tax relief claimed, as HMRC may ask for evidence to support your claim.

If you are not in self-assessment, you can also claim by contacting your local tax office and getting your tax code adjusted.

If you have not claimed previously, there is a time limit of four years to claim back any tax relief from HMRC.

Please be mindful of the fact that a claim must be made within four years of the end of the tax year that a member is claiming for.

To conclude, using your pension allowances and obtaining the full tax relief is a critical part of financial planning.

This tax relief is your reward for locking your money into a pension into your retirement date - so make sure it’s claimed in full. 

If you have any questions about the best way to manage your money, please get in touch with Emma or another member of the Future Life Wealth Management team by clicking HERE.