Higher rate taxpayers missing out on pensions tax relief
2nd October 2013
An estimated 182,000 higher rate taxpayers are missing out on pension contributions tax relief worth around £229 million, according to research from Prudential.
The research found that 26 per cent of those surveyed were failing to claim the additional 20 per cent tax relief on their pension contributions, while a further 15 per cent didn't know whether they were.
The higher rate tax earnings threshold was lowered to £41,451 this year, meaning more people who are paying into defined contribution (DC) pension schemes could be eligible for the 40 per cent relief on their contributions.
The first 20 per cent of relief is applied automatically but the additional 20 per cent must be claimed on the individual's self-assessment tax return.
The research found the average additional 20 per cent tax relief would be worth £1,255 per year. This is based on an average salary of £62,774 and an average monthly pension contribution of 10 per cent, for those higher rate taxpayers surveyed who were members of a DC scheme.
Prudential's tax expert, Clare Moffat, said: "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 savings."
"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."
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