Higher rate taxpayers lose £296 million in tax relief

Tax burden

Higher-rate taxpayers are missing out on £296 million a year in tax relief, worth an average £1,200 a person.

The research from life company Prudential found that six out of 10 people fail to claim the higher rate of tax relief that they are entitled to on their pension contributions.

In addition, four in five higher rate taxpayers were unsure if they claimed the extra relief or not.

HM Revenue & Customs estimates that 55% of 900,000 higher rate taxpayers in the UK contribute to defined contribution pension schemes, but many only receive the 20% basic rate relief worth £85 a month. 

Backdated tax

Members of occupational pension schemes receive basic and higher rate relief automatically through payroll, but members of personal and stakeholder pension schemes that are entitled to higher rate relief need to claim the additional relief through an annual tax return, or by informing HMRC.

Matthew Stephens, tax expert at Prudential, comments: "The good news is that it's possible to claim backdated tax relief, for up to three years for those who don't need to complete a tax return, and this money could make a large extra contribution towards their pension fund."

He adds: "Surely no one would knowingly turn their nose up at a potential £1,020 extra tax saving?"

This article was written for our sister website Money Observer

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