Are You Claiming Your Higher Rate Pension Relief?

by | Jan 6, 2022

The importance of saving for your retirement cannot be overstated.

And if anything, the last year has served to underscore the importance of doing so. It’s clearer than ever that we cannot simply rely on the State – it may not always be able to afford maintaining pensions and other forms of welfare. One method that you can use to save for retirement is, of course, pensions. And they come in many different forms.

From company pension schemes to personal pensions, they all help us save for retirement through tax relief.

It always amazes me that not everyone is claiming their higher rate tax relief on pension contributions. Everyone gets basic rate tax relief when making contributions. Are you making use of higher rate pension tax relief?

Once you understand how it works, you’ll see it’s a no brainer. Let’s break it down.

How higher rate pension relief works

Let’s say you see £80 coming out of your bank account into your pension fund, you will get £100 invested in the pension. That is to take account of the 20% basic rate tax.

However, if you are a higher rate taxpayer, you can get a further 20% back by submitting your tax return or amending your tax code. Speak to your accountant if you are not sure whether you are claiming this relief. It could be money you are losing out on and you could be paying too much tax.

If you are a higher rate taxpayer, chances are you should be submitting a tax return, even if the HMRC hasn’t sent you the form. If you are making pension contributions, you should definitely do a return each year to claim your higher rate relief.