Anyone whose income falls into the higher rate tax bracket is being urged to fill out a tax return even if they are not self-employed.
This is because higher-rate taxpayers, who pay 40% tax on earnings above this amount, can also claim 40% on any payments they make into their pension.
When people pay into a pension via an employer or into a private personal pension, pension companies only claim relief of 20%.
So anyone paying more needs to claim that refund through self-assessment even if they are not self-employed.
Dean Butler, managing director for retail direct at Standard Life, part of Phoenix Group, said: “If you earned £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.
“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.”
Butler said this amount is repaid via a tax rebate, a change in tax code, which means you’ll pay less tax the following year or a reduction in your tax bill for the current year.
He added: “If you’re not sure whether you’re contributing via salary sacrifice, your employer will be able to help.”
Once you start completing a self-assessment, you will be expected to complete one in each future year, unless you tell HMRC you no longer need to. Be sure to make a note in the calendar for when the time comes again.
Butler added: “Another important reason to have a good grip on your tax return if you’re a higher earner is there’s a chance you might have exceeded your annual allowance, and it’s your responsibility to disclose this.
“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.”
First, you’ll need your Government Gateway user ID and password to register for online self-assessment.
If you don’t have a Government Gateway account, you can create one when you first visit the self-assessment section of the HMRC website and sign in.
You’ll be prompted to set up a user ID and password, and then you’ll be sent a 10-digit Unique Taxpayer Reference (UTR) number in the post.
You’ll also be sent your activation code, which can take up to ten days to arrive. You need to activate your account within 28 days of the code arriving, or it’ll expire. You’ll then be able to use the HMRC online service to submit your return. Alternatively, you can send your tax return via post.
If you fail to file your return, file it after the deadline, or fail to pay your tax bill, you’ll incur a penalty.
If your return is up to three months late, you’ll be charged £100, and if it’s any later then you could be charged an extra £10 a day up to £900. There are further penalties if your return is more than six or 12 months late.
Butler said: “If you’re late paying your tax bill then you’ll be charged interest on late payments too. You can appeal against a penalty if you have a legitimate excuse, but it’s far less hassle to file your return on time and pay your bill in the first place!”