As the 31 January self assessment deadline for tax year 2024-25 approaches, pension provider Penfold warns that higher and additional rate taxpayers could be leaving hundreds, or even thousands, in unclaimed pension tax relief each year.

Basic rate pension tax relief is added automatically in PAYE pension contribution calculations, but higher and additional rate tax relief needs to be claimed, either through Self-Assessment or HMRC’s online service.

The only exception is where employees are in salary sacrifice or net pay pension schemes as they typically receive full relief automatically.

Chris Eastwood, CEO of Penfold said: ‘We regularly see people paying higher rate tax who assume all their pension tax relief is handled automatically. In many cases, it isn’t, and the result is money being left on the table that HMRC won’t pay back unless it’s claimed.’

‘Taxpayers are most likely to miss higher rate pension tax relief if they earn above the basic rate threshold, pay into a personal pension or a workplace scheme that uses relief at source, of course, there are those who simply do not realise that only 20% tax relief is added automatically.

‘For someone paying 40% income tax, a £10,000 pension contribution could cost as little as £6,000 once all tax relief is claimed,’ Eastwood added. ‘If you don’t claim the extra relief you’re entitled to, you simply pay more tax than you need to.’

But self assessment is not the only way to claim back the relief, it is also possible to use HMRC’s online service.

Penfold stresses that not everyone needs to file a self assessment tax return to claim higher rate pension tax relief. Those who already complete self assessment can usually claim through their tax return, but it can also be claimed using HMRC’s online service.

How to claim using HMRC online service

To claim tax relief on personal and workplace pension payments via HMRC online service, you will need National Insurance number, type of pension, name of the pension provider, net amount of pension contributions for each tax year claiming for, and payroll number or reference number.

Proof for each tax year claimed for is also required, which is a letter or statement from the pension provider, or payslip from an employer, which needs to be uploaded to HMRC as part of the claim. This proof must include full name, details of the pension contributions paid and the relevant tax year, and evidence 20% tax relief was received automatically from your employer for workplace pensions.

Eastwood added: ‘The key is understanding how your pension scheme works. If you don’t know whether your pension uses relief at source, it’s worth checking, especially before the January deadline.

‘January is an important moment to review contributions made during the tax year and ensure any higher rate relief is correctly claimed.’

From 2028, the government is slashing the threshold for salary sacrifice pension contributions to £2,000 from unlimited within pertaining annual allowances as is currently the case. This will add to pension tax complexity as more taxpayers have to reclaim the tax relief as it will not be automatically deducted from pension contributions over the limit.

HMRC guidance, Claim tax relief on your private pension payments

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