According to a recent study, hundreds of thousands of higher earners missed out on more than £1 billion in pension tax breaks over the last five years.
Pension savers receive tax relief at the same rate as income tax on the money they contribute to their retirement accounts, but those who pay the higher 40% and 45% rates must apply for additional relief by filing an annual tax return.
Between 2016 and 2021, three out of every four higher-rate taxpayers failed to meet this requirement. As a result, £1.3 billion was lost.
An estimated £245 million in annual tax benefits go unclaimed by taxpayers who are subject to the higher tax rate, while an estimated £18 million in tax benefits go unclaimed by taxpayers subject to the additional tax rate. This amounts to an average of £425 in unclaimed relief for taxpayers subject to the higher tax rate during the tax year 2020-21, and £527 for taxpayers subject to the additional tax rate.
Neal Groves, Tax Partner at Beavis Morgan, comments: “The Government wishes to encourage us all to save for our retirement and has made available generous tax breaks to incentivise us to contribute. It is however easy to miss some or all of the tax reliefs available, so it is worthwhile reviewing your pension position to ensure you are claiming everything you can.”
For practical advice on the best approach to planning for retirement and mitigating inheritance tax, contact your usual Beavis Morgan Partner or email info@beavismorgan.com.
We will review your individual situation including your property assets and provide the right advice to help you make informed decisions. If necessary, we can also introduce you to our Beavis Morgan group business Integrity 365, where an Independent Financial Adviser will assess your situation and advise on the pension protections best suited to you.