Research by Unbiased.co.uk reveals that tax opportunities are being wasted each year, sometimes just because people are unaware of what they need to do, or can do to minimise the tax they pay.
If you are a higher rate tax payer it is vital that you know how the tax relief is claimed on your pension contributions.
When you make a contribution to your pension you invest £80 for every £100 that goes in toy our pension. That is, you put in £80 and HMRC put in £20. This is their way of giving you a tax rebate for investing in to a pension. This automatic tax relief of 20% is in lieu of the basic rate income tax you pay.
However, they also offer further tax relief for higher rate tax payers. If you are a higher rate tax payer you can receive a further 20% tax rebate in lieu of the additional tax you have paid above the basic rate, i.e. 40% higher rate tax minus the 20% already received automatically into your pension.
However, you must claim this higher rate tax rebate yourself via a self assessment tax return. If you do not complete one and you are making pension contributions, and you are a higher rate tax payer, then you are missing out on tax rebates.
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