As the January 31 deadline for HMRC self-assessment looms, a financial expert warns that taxpayers must not only settle their dues but also ensure they're reaping the benefits of pension tax relief. Many individuals who are accustomed to PAYE and don't typically engage with self-assessment "must be particularly alert not to lose out at this time of year by forgetting to claim money that is rightfully theirs".
Gary Smith, a financial planning partner at Evelyn Partners, emphasised: "Pension tax relief is the outstanding benefit of the UK's private pension saving system – it's one of the main reasons advisers encourage most people who can afford to, to save into a pension. So it's important that savers who take up this opportunity don't shoot themselves in the foot by neglecting to collect the great benefits on offer.".
Research from PensionBee in 2023 indicated that hundreds of thousands of higher and additional rate taxpayers failed to claim approximately £250 million in pension tax relief annually. Interactive Investor suggests that up to a third of higher-rate taxpayers could be missing out on an extra 20% tax relief on their pension contributions each year.
Mr Smith warned: "Many savers completing tax returns are so focused on making sure they are not caught out by HMRC for under-reporting taxable income or assets, that they forget to collect pension tax relief they are owed and lose out on a substantial rebate. Others have no other reason to get involved in self-assessment, but they need to remember that they might have to for this purpose – although it is possible to claim back tax relief without having to complete a tax return.".
