How to Claim Higher-Rate Pension Tax Relief in the UK

High earners often face a 60% tax rate due to losing personal allowances. At TaxQube, we implement strategies to reduce this burden, ensuring compliance and maximise savings.

 What Is Pension Tax Relief?

Pension tax relief reduces your taxable income, helping you save for retirement more efficiently. While basic-rate taxpayers receive 20% relief automatically, higher-rate (40%) and additional-rate (45%) taxpayers need to claim the additional relief separately.

 Why Higher-Rate Taxpayers Need to Claim Additional Relief

For those earning over £50,270, the government only applies basic-rate relief automatically. To claim additional relief, you need to take extra steps through HMRC. Of course, you can use a specialist firm like TaxQube to handle these tax relief claims on your behalf.

 Steps to Claim Higher Pension Tax Relief

1. Check Your Eligibility: Ensure you’re contributing to a qualifying pension scheme and are a higher or additional-rate taxpayer.
2. Submit a Self Assessment Tax Return:

– Log into your HMRC account.
– Add pension contributions under the ‘Reliefs’ section.
– Ensure your figures match those provided by your pension provider.

3. Contact HMRC Directly: If you don’t file a Self Assessment, write to HMRC with details of your contributions.
4. Claim for Past Years: Relief can be backdated for up to four tax years.

 Example Savings Potential

If you contribute £8,000 into a pension, basic-rate relief adds £2,000, totalling £10,000. As a higher-rate taxpayer, you can claim an additional £2,000, lowering your overall tax bill.

 Key Benefits of Claiming Higher-Rate Tax Relief

• Boost Your Savings: Extra relief significantly increases your pension pot.
• Reduce Your Tax Bill: Higher-rate taxpayers save more with this entitlement.
• Improve Financial Security: Enhanced savings provide a more comfortable retirement.

 FAQs About Pensions

1. How much can I contribute?
   You can contribute up to 100% of your earnings, capped at £60,000 annually. Contributions exceeding this limit may incur tax charges.
2. What if I’m in a workplace pension?
   Workplace pensions often operate under salary sacrifice schemes, which automatically adjust your tax contributions.
3. What is a tapered pension allowance for high earners?
   If you are a high earner, it is possible that your pension allowance is being reduced. We have written a useful article that you can read to learn more about these rules and how they may affect your pension contribution decisions. Click here.
4. At what age can I access my private pension in the UK?
   In the UK, the minimum age at which you can access your private pension is generally 55, but this is increasing to 57 in April 2028. Here are the details:
   1. Current Rule:
      • You can access your private pension (including workplace and personal pensions) from the age of 55.
   2. Upcoming Change:
      • From 6 April 2028, the minimum pension age will increase to 57.
      • This change applies to most pension schemes, but protections exist for certain schemes that may allow earlier access.
   3. State Pension Age:
      • This is separate and typically higher (currently 66, rising to 67 between 2026 and 2028, and possibly higher in the future).

   When you access your private pension, 25% can typically be taken as a tax-free lump sum, with the rest subject to income tax. It’s wise to plan carefully to avoid unintended tax implications.

 Related Resources

• Learn more about Self Assessment tax returns on HMRC’s website: https://www.gov.uk/self-assessment-tax-returns.
• Explore the pension annual allowance and limits: https://www.gov.uk/tax-on-your-private-pension/annual-allowance.

Pro Tip: Regularly review your pension contributions with a financial adviser or accountant to ensure you’re maximising your savings and relief opportunities.

If you need personalised guidance, contact TaxQube accountants today for expert advice tailored to your financial goals.

Appoint TaxQube to manage your High Earner Pension Tax Claims

Being a regulated firm of specialist tax accountants, we are able to help you in submitting your tax reports to HMRC with the pension tax relief claims. We look after a large number of professionals from various industries and able to deal with pension tax claims and other complex transactions if applicable.

Unlike other firms, we do not charge anything from your tax savings which could be in thousands, you keep 100% of it. We help you maximise your tax savings as we have seen cases where people miss out by simply doing it themselves or by not using a tax specialist advisory firm like TaxQube.

We only charge a monthly retainer fee which gives you access to accredited tax advisers to help you manage your taxes and advise that you need to optimise your taxes. Contact us for a free of charge initial consultation.