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Are you earning over £50,270 and contributing to a pension? You could be owed money from the taxman. Find out how below.
You can claim extra higher-rate and additional-rate pension tax relief if:
This can boost your contributions by a substantial 25%! You can claim this relief either as a cash refund or as a reduction in your tax bill through your Self Assessment tax return.
Higher-rate and additional-rate pension tax relief is extra relief available to those earning over £50,270 on their personal pension contributions. This is on top of the 25% basic-rate tax relief everyone gets when they contribute to their pension.
Many people miss out on this extra relief, with an estimated £830 million unclaimed each year. This is because, unlike basic-rate tax relief, you need to claim higher-rate and additional-rate tax relief yourself.
There’s another great benefit: this extra tax relief doesn’t have to go into your pension. You can use it to:
Basic-rate income tax relief is granted to every taxpayer on their personal pension contributions, capped at the annual allowance of £60,000 or 100% of total earnings, resulting in a 25% increase in contributions.
For higher-rate taxpayers, an additional 20% tax relief is available on contributions, totaling 40% tax relief, in line with the 40% tax rate paid on earnings surpassing the higher-rate income tax threshold.
This supplementary relief operates similarly to basic-rate relief, effectively adding another 25% to contributions. Here’s a breakdown:
The amount of extra tax relief depends on:
Specifically, you can seek 20% extra tax relief on earnings above £50,270 taxed at 40%, or 25% extra tax relief on earnings taxed at 45%.
Current legislation in the UK allows you to claim a tax rebate for up to four tax years. This means that at the current moment, you can make a claim for the periods:
