We are always told we should save for our retirement and the last year has been a good reminder that we cannot simply rely on the State, as it may not always be able to afford maintaining pensions and other forms of welfare. One way that we can use to save for retirement is, of course pensions and they come in many different forms. From company pension schemes to personal pensions, they all help us save for retirement through tax relief.
It always amazes me that not everyone is claiming their higher rate tax relief on pension contributions. Everyone gets basic rate tax relief when making contributions. If you see £80 coming out of your bank account, you will get £100 invested in the pension. That is to take account of the 20% basic rate tax.
However, if you are a higher rate taxpayer, you can get a further 20% back by submitting your tax return or amending your tax code. Speak to your accountant if you are not sure whether you are claiming this relief. It could be money you are losing out on and you could be paying too much tax.
If you are a higher rate taxpayer, chances are you should be submitting a tax return, even if the HMRC hasn’t sent you the form. If you are making pension contributions, you should definitely do a return each year to claim your higher rate relief.
Mike Lawrence is the Managing Director of Guardstone Financial Planning Ltd, a fee-based firm of Financial Advisers www.guardstonefp.com(.)
HM Revenue & Custom’s practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.