Higher-Rate Tax Relief –Do Not Miss Out
The recent budgets have attacked pension tax relief for very high earners, but over eighty percent of higher-rate taxpayers continue to be eligible for 40% tax relief on their contributions.
This is an exceptionally valuable benefit and nearly a quarter of a million people do not claim this relief - either through apathy, or because they don’t appreciate that it isn’t given automatically.
The good news is that backdated claims can be made, but the time limit is reducing so taking action now.
People earning above £43,875 in this tax year may be able to claim a further 20% relief (depending how much income is liable to higher-rate tax). By not claiming this additional tax relief, someone earning £100,000 and paying £5 000 a year contribution could be missing out on £1,000 per year - money that was rightly theirs.
For most of us in the UK the income tax system requires little or no thought as many people pay tax through the Pay As You Earn system, which automatically deducts tax. If this is the case, claiming additional relief requires you to roll up your sleeves and claim your additional relief.
To obtain the additional tax, people either need to complete a self-assessment return or ask the local tax office to change their tax coding. The good news if you find any clients who haven’t claimed higher-rate relief is that they can make a backdated claim.
The time limit for claiming repayments is currently five years and ten months from the end of the period for which the return was made. However, changes introduced by the 2009 Finance Act means that after 5 April 2010 claims must be made within four years. There is a small transitional period
So send us an email or call us if you need assistance.
2 comments so far
Post a comment
Sorry, comments for this entry are closed at this time.
Philip,
How would one know that they are entitled to a claim?
David
By David Hillier at 12:40 pm on Feb 23, 2010
David
For employees who are taxed at source anyway, they need to check a number of items for their tax return; interest earned from savings, pension contributions etc in order to have the correct tax code.
A common mistake for those higher rate tax payers making pension contributions is that they forget to claim any additional relief due to them - 20%. You can call your own tax office for assistance and submit information to them or go to an accountant and they will sort it out for you.
You should know by your tax code but if you have a car or other employee benefit it can diistort the picture.
I will call you separately and discuss with you, thanks for commenting.
By Philip Church at 1:07 pm on Feb 23, 2010