Individuals earning £50,270 or more are being urged to review their eligibility and claim pension tax relief from HMRC, as many higher-rate taxpayers failed to take advantage of this valuable perk last year.
Currently, basic-rate taxpayers automatically receive 20% tax relief on pension contributions, which HMRC adds directly to their pension pots. However, higher-rate taxpayers—those paying income tax at 40% or 45%—must proactively claim the additional relief through a self-assessment tax return.
Data reveals that around 800,000 higher-rate taxpayers, whose incomes range between £50,270 and £125,140, did not claim this additional relief last year. On average, each missed out on £1,756 in tax relief.
Sir Steve Webb, former Pensions Minister, emphasized the growing significance of claiming this entitlement: “As more individuals enter higher tax brackets, it’s vital they claim all the tax relief they qualify for. Those contributing to personal pensions or ‘relief at source’ schemes can secure higher-rate relief—if they claim it.”
Charlene Young from wealth manager AJ Bell highlighted the importance for those newly in the 40% tax bracket: “Many may only be receiving basic-rate relief of 20% but are entitled to claim the extra 20%. Given tax thresholds freezing has pushed more people into higher rates, it’s crucial to ensure you aren’t unknowingly losing out by not claiming the full relief.”
An HMRC spokesperson added: “We encourage higher and additional-rate taxpayers who have received basic-rate tax relief on their pension contributions to claim any further relief via self-assessment or by contacting HMRC directly.”