Tax season can be a stressful time for many, but did you know that you might be entitled to claim an additional 20% (or 25%) tax back from your pension contributions? If you’re a higher rate taxpayer, this could mean a significant boost to your finances. In this article, we’ll explore how this process works and what steps you need to take to ensure you don’t miss out on potential savings.
How does it work?
Many pension schemes operate on a ‘relief at source’ basis, wherein your pension provider claims back tax from HMRC at the basic rate of 20% on your contributions. However, if you fall into the higher rate taxpayer bracket, you could be eligible to claim back an extra 20% (or 25%) directly from HMRC. This additional relief can make a substantial difference to your overall tax liability.
What do I need to do?
If you’re wondering how to claim this extra tax relief, the process is relatively straightforward. For those who regularly complete an annual Self-Assessment tax return online, you should include your pension contributions on the return before the HMRC deadline of 31st January 2024 for the 2022/23 tax year. This tax year commenced on 6th April 2022 and concluded on 5th April 2023.
For individuals who do not typically file an annual tax return, the option to contact HMRC directly for a tax refund is available. This ensures that regardless of your usual tax-filing habits, you have the opportunity to claim what you’re entitled to.
Important Information:
Conclusion:
Claiming your extra tax relief on pension contributions is a smart financial move that can have a positive impact on your overall tax liability. As the HMRC deadline approaches, take the time to review your pension contributions and assess whether you qualify for additional relief. Remember, this information is provided as general advice, and if you have specific questions or concerns, it’s always advisable to consult with a qualified financial advisor or contact HMRC directly. Don’t miss out on the opportunity to optimise your tax situation and potentially put more money back in your pocket.
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