...but it’s not too late to
claim higher rate tax relief
on pension contributions.
As your pension administrator, we reclaim basic rate
tax relief of 20% on your pension contributions from
HM Revenue and Customs (HMRC) on your behalf,
but if you are a 40% or 50% rate taxpayer you can
reclaim further tax relief via your self-assessment.
Despite the deadline for self-assessment returns
passing on 31 January, you can still reclaim up to
four years worth of higher rate tax relief. This is
great news if you’re a higher rate taxpayer as recent
estimates suggest that millions of pounds are lost
every year in unclaimed tax relief.
It has been difficult for higher earners to know
how much they can contribute to a pension and
receive higher rate tax relief in recent years due
to the Government’s anti-forestalling regulations
which were in place from April 2009 until April
2011. Before this, the amount of tax relief you
could receive was fairly simple to calculate, as
long as an individual didn’t contribute more than
100% of their earnings and did not go over the
annual allowance for the tax year in which the
contribution was made.
The changes made in April 2009 may have been
confusing if you were a 40% or 50% rate taxpayer
as it was not clear if you could claim back higher
rate tax relief on contributions made between April
2009 and April 2011. However, if you have not
claimed additional tax relief on your contributions,
you can still do so by writing to your local tax office
or claiming it via your self assessment. You can still
claim unclaimed higher rate tax relief going back
four tax years.
If you are a 50% rate taxpayer you could be
missing out on up to £15,000 in unclaimed tax
relief if you maximise the annual allowance of
£50,000. If you are a 40% rate taxpayer, you could
be losing out on £10,000. Remember, as your
pension scheme administrator we will claim basic
rate tax relief but it is your responsibility to claim
any additional tax relief.
With numerous changes to the rules that govern
how much you can contribute to your pension in
recent years it is possible that you have thought
that you could no longer claim higher rate tax
relief. The good news is that you can claim back
up to four years worth of tax relief on any pension
contributions you have made. And remember you
are only claiming what you’re entitled to.
This newsletter is prepared for general information only. Nothing in it should be taken as an offer, invitation or inducement to engage
in investment activity. Alliance Trust does not give financial advice. Please remember the value of investments and any income from
them can go up or down and you may not get back the amount you invested. All investments carry an element of risk, which may
differ significantly, and if you are unsure as to the suitability of any particular investments, you should seek professional financial advice.
Foreign markets will involve different risks than UK markets, in some cases the risks will be greater. The potential for profit or loss from
transactions on foreign markets or in foreign currency denominated marketswill be affected by fluctuations in foreign exchange rates.
We do not give advice and the inclusion of particular stock names is not intended as a recommendation. You should remember that the
amount of tax relief depends on your individual circumstances and that the beneficial tax treatment of ISAs may not continue in the
future. Information relevant to 2011/12 tax year unless otherwise stated.
This information is based on our understanding of current tax law and HM Revenue & Customs (HMRC) rules. Legislation and tax
regulations are not guaranteed and can change at any time. Current tax advantages may change and could be withdrawn; tax rates
and reliefs may change and depend on individual circumstances.