Thousands are left missing out on pension tax relief

THOUSANDS of taxpayers are not including correct information about their pensions on their annual returns, according to mutual insurer Royal London.

Many pension savers who pay income tax at the higher or additional rate are unaware they need to claim higher rate relief on contributions via their tax return.

While contributions to a pension pot automatically attract 20 per cent tax relief, those who pay tax at 40 or 45 per cent rate only receive extra tax relief if they include the details on their return.

Many also forget to report contributions from themselves or an employer that take them over the annual £40,000 allowance, leaving them liable for a big tax bill in the future.

Steve Webb, director of policy at Royal London and a former Pensions Minister, says: ‘Filling in your tax return can be challenging enough, but the complexity of the rules on pension relief for higher earners is a particular nightmare.

‘The good news is that some higher earners can claim additional tax relief, provided they put the right information on their return. Others need to make sure they report contributions in excess of their annual allowance and pay the tax due now. However, the complexity of the tax relief systems means this can often be a real challenge. A lot of this goes unclaimed or unreported.’

Millions of people have yet to file their self-assessment tax returns, which are due by midnight on Friday, January 31.

Last year, more than 735,000 left filing until the day of January 31 itself, and more than 60,000 left it until the last hour.