Almost 20% of the 7.9m personal pension savers in the UK are not claiming the full amount of tax relief which they are entitled to, according to one of the large financial advice networks in the UK. That’s a lot of money being left on the table. And HMRC are certainly not going to tell that you could be claiming it back.
Up to 1.6 million higher rate taxpayers could lose out on £360m the current tax year. It amounts to about £225 per person, which doesn’t sound a great deal, but could amount to £6,750 over a typical 30-year span of pension contributions. I don’t know about you, but I’d rather have that in my pension than not.
So who does it affect?
Quite simply anyone making pension contributions, who are a higher rate tax payer. That is anyone earning more than £43,000 in the current tax year. Pension contributions current attract tax relief of 40 percent tax, however only 20 percent is automatically claimed by their pension provider, so investors have to claim the other 20 percent through their self-assessment tax return.
Why are investors not claiming the tax relief?
The biggest reason that investors are not claiming the higher rate relief is because quite simply many do not realise that they have to do it.
Other reasons for not claiming the full tax relief are the perceived complexity of claiming the tax relief and simple forgetfulness.
The situation has been increasing since 2010, as there are now more and more people paying higher rate tax, with the figure increasing from 3.3 million to almost 5 million in 2016.
Action call
The reality is that higher rate tax relief is unlikely to be here forever as it is continuously under the watchful eye of the Treasury who are looking to make savings. Our advice is to make sure that you claim whilst it is still there to claim as the days may be numbered.
If you or your family would like to talk us about your financial plans for future, please get in touch for a no-obligation meeting. Go to our website www.miadvice.co.uk and contact us via our “Get in touch” form on our home page or Contact Martin Dodd on 01902 742221.
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It is advisable to take advice from a professional financial adviser when making major financial decisions.
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The contents of this article should not be regarded as specific advice. No responsibility can be accepted by Martin Dodd or Midlands Investment Agency Ltd., for any loss that may occur by a person acting or refraining from acting on the basis of this article.
