Higher Rate Taxpayers Pension Relief
The recent self-assessment tax return deadline has once again highlighted an issue for higher-rate taxpayers regarding pension relief on contributions, a position echoed by recent research by Royal London. While contributions to a pension pot automatically attract 20% tax relief, those who pay tax at the 40 or 45% rate only receive extra tax relief if they include the details on their return.
Tax Partner at Haggards Crowther Terry Smith comments “We have been advising higher rate clients on this for some time as most are unaware of the rules on claiming relief, and this years tax returns are no different”. He continues “We are obviously here to support our clients and understand tax rules on their behalf, but I question how the thousands of individuals that complete their returns themselves or don’t have such a proactive adviser, manage with these complexities?”.
He concludes “Higher rate taxpayers also need to be aware of the tapering of pension allowance for annual income over £150,000, which reduces the allowance by £1 for every £2 of earnings. Those not managing pension contributions properly in terms of tax returns run the risk of high bills further down the line”.