HMRC has issued a two-week warning to anyone in the UK who is on a salary of £50,000 or more. People who earn £50,200 or more should act now and claim the extra 20 per cent tax relief they are entitled to by the Labour Party government.
This will be repaid via a tax rebate, a change in tax code or a reduction in your tax bill for the current year, experts have pointed out. It comes ahead of the self assessment deadline hitting for tax returners, with a January 31 date looming.
Dean Butler, managing director for retail direct at Standard Life, part of Phoenix Group, said: “If you earned over £50,271 a year in the last tax year, not completing a self-assessment tax return could lead to you missing out on valuable tax relief on pension contributions.
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“Anyone with a pension receives 20% tax relief on every contribution they make, and this is added automatically. However, unless you’re using salary sacrifice to make pension contributions, higher rate taxpayers might need to claim the extra 20% of tax relief they are entitled to.”
Mr Butler continued: “Higher rate taxpayers should complete a self-assessment return every year they’ve paid higher rates, and anyone that hasn’t done this may have built up unpaid tax relief in arrears. It’s worth investigating if you think this applies to you, as you can make claims for up to four previous tax years, meaning you could be owed thousands of pounds from the government.”
He added: “HMRC doesn’t tend to prompt non-self-employed people to submit a self-assessment, so any higher rate taxpayers who pay their tax through PAYE need to actively request to submit a tax return.”
Mr Butler said: “The annual allowance is the amount you can pay into your pension each year with tax relief, and this sits at £60,000 for most people. If you’ve already started accessing your pension, beyond your tax free cash, your annual allowance will reduce to £10,000, and if you earn £200,000 or more your allowance could begin to be ‘tapered’ down to £10,000.”