Britons are at risk of “missing out” on around £425 pension tax relief but workers only have weeks to claim this amount before the Self Assessment deadline.
Taxpayers have until January 31 to file their Self Assessment tax return for 2022/23 but experts are warning that many people are unaware they may have to do so.
Experts at PensionBee are reminding taxpayers of the “pension-related reasons” why someone needs to file a Self Assessment tax return.
Those who do not file before the deadline risk being hit with a penalty or late fees, however Britons are also “missing” vital pension tax relief.
The Self Assessment tax deadline is looming
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Between 2016 and 2021, PensionBee estimates that around £1.3billion was left to HM Revenue and Customs (HMRC) in unclaimed tax relief from higher and additional rate taxpayers.
Only basic rate relief is added automatically to pension contributions by pension providers operating “relief at source” retirement plans.
However, if someone earns more than £50,270 in 2022/23 and pay into a “relief at source” pension, they will have to fill out a Self Assessment return to claim additional tax relief.
According to PensionBee, this relief is worth an estimated £425 on average for a higher rate taxpayer.
Outside of claiming pension tax relief, workers may need to file a Self Assessment form if they have started withdrawing from their pension. Those who withdraw from their pension often overpay on tax but this can be refunded by filing a tax return.
Furthermore, PensionBee reminded people that they have to state whether contributions have exceeded the Annual Allowance or Money Purchase Annual Allowance, as well as whether “carry forward” rules are being applied.
Total pension contributions have to be within a certain threshold to benefit from tax relief.
Contributions exceeding the Annual Allowance of £40,000 for the 2022/23 tax year would need to be applied to any unused allowance from the three previous tax years through “carry forward”, to still get relief. The Annual Allowance has been raised to £60,000 for 2023/24.
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There may be 'pension-related reasons' why someone would need to file a Self Assessment tax return
PAAny taxpayer who has already started to take taxable income from their pension can pay in the Money Purchase Annual Allowance of £4,000 and still get tax relief for the 2022/23 tax year.
Becky O’Connor, the director of Public Affairs at PensionBee, warned that “there may be some good pension-related reasons” to fill out a Self-Assessment tax return.
She explained: “This might especially apply to you if you have recently changed jobs and are now paying higher rate tax and are in a relief at source scheme.
“Or, if you were already in one but have had a pay rise and might now need to claim extra tax relief.
“It might also be worth checking the details of any pension you have paid into in the last four tax years, as you might have been missing out on tax relief owed to you without realising.”