HMRC has new rules when it comes to claiming pension tax relief, requiring everyone to evidence their claim for higher amounts
Pensioners are warned of new changes when it comes to claiming tax relief this month. HM Revenue and Customs (HMRC) has strengthened regulations surrounding how higher earners can claim additional pension tax relief, following the implementation of new restrictions from the beginning of September.
From September 1, applications for extra relief can no longer be submitted via telephone. Taxpayers must now lodge requests either digitally or through postal correspondence.
As reported by Express.co.uk, all claimants will also now be required to supply evidence from their pension provider when making claims, a stipulation that previously only applied to those contributing over £10,000. The modification follows an internal assessment which discovered approximately one-third of claims for up to £10,000 contained errors.
Numerous mistakes involved people who weren’t higher-rate taxpayers submitting applications, incorrectly reporting their contributions, or seeking relief on pensions already encompassed by “net pay” arrangements. Through net pay, contributions are subtracted before income tax is calculated, meaning savers automatically receive their complete entitlement.
For most higher earners in workplace schemes, no additional steps are required. Nevertheless, those contributing to personal pensions via the “relief at source” system – where only basic rate relief is applied automatically – must still reclaim supplementary relief through self-assessment.
HMRC calculated that roughly 80,000 of these claims are submitted annually. Charlene Young, senior pension and savings expert at AJ Bell, said: “HMRC has made it tougher to claim pension tax relief, requiring everyone to evidence their claim for higher amounts. Previously, the requirement to evidence a claim was only placed on those paying in more than £10,000.
“This means that anyone claiming for higher or additional rate tax relief (and the intermediate rate in Scotland) will need to speak to their pension provider for evidence of what they’ve paid into the scheme throughout the year. If you can’t find this when you log in to your pension account, or through the provider’s app if they have one, then you may need to contact the pension company and ask them to send it to you.”
She added: “You’ll then need to supply this information to HMRC when you make a claim for the tax relief owed to you.” An HMRC spokesperson said: “We’re lowering the threshold to ensure that people claim the right amount of relief and protect taxpayers’ money. This comes after we conducted a review, which revealed that many claims below the current evidence threshold were incorrect.
“Customers can quickly and easily make a claim and provide supporting evidence, using our online form.”
How to claim pension tax relief if you’re eligible
Ms Young recommended initially examining your payslip to establish whether you qualify to claim pension tax relief. She explained: “That should show your National Insurance (NI) number and any contributions made to your pension.
“You then need to find out what type of scheme you’re in. Some schemes, normally known as ‘net pay’ arrangements, will pay pension contributions before any tax is paid. In this case, income tax won’t have been deducted prior to the money being paid into a pension, meaning you’re already getting the full rate of relief and don’t need to claim.”
However, if your pension contributions are made after tax, typically referred to as ‘relief at source’, then your company will be making tax deductions and then calculating pension contributions. Ms Young stated: “The pension scheme will automatically claim back 20% basic rate relief, but you must then claim the additional 20 per cent or 25 per cent relief yourself.”
She further added: “If you can’t tell from the information on your payslip what type of scheme you’re in, contact your employer or the pension provider and ask them to tell you.” To make a claim, people must directly contact HMRC – there are several ways to do this.
Ms Young advised: “If you complete a tax return, you can include the information there and recover any tax relief owed. If you don’t usually have to complete a tax return, you can claim the extra relief directly online from HMRC. You can also write to them, although it will take longer to process.”
To carry out the process online, visit the Government website here and follow the link to make a claim. Once your claim is processed, you’ll receive the additional relief either through an adjustment to your tax code, a tax refund, or a modification to your annual tax bill.