Higher-rate taxpayers contributing to pensions should ensure they reclaim the full pension tax relief they’re due, advises Simon Bonnett from Duncan Lawrie Private Bank. Around 250,000 people in the highest-earning tax bracket wrongly assume that personal contributions paid to company pensions automatically receive up to 50% tax relief, when it is only the basic rate of 20%.
“Higher-rate taxpayers are responsible for filling in their own self-assessment tax forms and claiming pension tax relief,” says Bonnett. “Many fail to do so, [believing] their employers will have claimed it on their behalf.”
Only people in conventional occupational money-purchase schemes enjoy full tax relief at source. This could be costly: on a £10,000 contribution you could lose out on £2,000-£3,000. If this affects you, you need to act fast as the deadline for claiming tax relief for the past financial year is 31 January 2012.
HMRC has tightened the rules on backdating claims, although it’s still possible to claim rebates back over four years.