Hundreds of thousands of taxpayers are missing out on an average of £760 a year in unclaimed tax relief on their pensions.
Government figures show three quarters of higher rate taxpayers have missed out on tax relief since 2016/2017, with £4.1billion in total unclaimed tax relief for higher and additional rate taxpayers.
People in the top tax brackets have missed out more than £750 a year on average for each year during the period:
- 2016/2017 – £751.20
- 2017/2018 – £761.32
- 2018/2019 – £763.75
- 2019/2020 – £779.53
- 2020/2021 – £769.53
- 2021/2022 – £766.18.
Will Stevens, head of Financial Planning at Killik & Co, said: “The number of the UK’s top earners and the vast amount of unclaimed relief they leave each year should be a concern for anyone paying into a pension.
“We have been helping clients amend their circumstances, and reclaim lost relief, for years. While the increase we’ve seen in wages, given the current inflationary environment, is a good thing, it is important that those entering a new tax bracket are able to navigate the nature of their new financial situation and are aware of exactly what they’re entitled to when it comes to tax relief.
“Pensions are a notoriously complicated landscape to navigate, and it’s easy to understand why people may feel inclined to bury their head in the sand about them.”
Basic rate taxpayers get their 20 percen tax relief automatically claimed back by their pension providers, but higher and additional rate taxpayers have to claim their relief from HMRC through filing a tax return.
Mr Stevens said: “Those affected by this issue will be relieved to know that they are able to claim up to the last four tax years’ worth of pension tax relief.
“With the tax return deadline fast approaching at the end of January we want to make sure everyone is equipped with the knowledge of what they are entitled to so they can take the necessary action where appropriate.”
Some £552million in tax relief for higher and additional rate taxpayers went unclaimed in 2021/2022, with the vast majority of this belonging to those on the higher rate.
Killik & Co said one reason for this could be as a result of wage inflation, with rising wages moving more people into the higher rate tax band.
If a person is unsure if they need to file a tax return, they can check using this tool on the Government website.
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