If you are a higher rate or additional rate taxpayer, do you make employee pension contributions into a workplace auto-enrolment scheme or a defined contribution pension scheme?
If the answer is yes, have you claimed the higher rates of income tax relief available?
Basic rate tax relief is given at source by HMRC paying basic rate tax relief on your net contributions directly into your pension scheme.
To claim the higher or additional rate tax relief on employee pension contributions that you have paid, you must enter the employee pension contributions paid on your self-assessment tax return.
Many taxpayers do not and lose out on tax relief.
How much tax could you overpay by not entering your pension contributions on your tax return?
This is best shown by an example.
Suppose you earn a salary of £60,000 and make auto-enrolment employee pension contributions of 4% of your salary.
If you do not claim the pension contributions on your self-assessment tax return, then each year you are overpaying tax of:
£60,000 times 4% times 20% = £480.
You can reclaim overpaid tax for the previous 4 tax years.
In this example, you could make a tax reclaim of £1,920 (4 times £480).
If you would like Metis Tax to review whether you have claimed all the pension tax relief available to you, and help you make a tax reclaim, please contact us.
