We all know that HMRC finds it extremely difficult to get taxation correct – funny really, as it is their job! Tax relief on pensions is one of the areas they have recently been criticised for not getting quite right. There are two types of tax relief:
Relief at source means your contributions are taken from your net pay (after your wages are taxed). Then your pension provider automatically claims tax relief for you from HMRC, adding the basic tax rate of 20% to your pension contributions.
A net pay arrangement means the pension contributions are collected before Income Tax. For taxpayers, this means full tax relief at the highest rate is automatic and no income tax is paid on money contributed to a pension.
Many of you whose pensions are managed by us get tax relief using the relief at source method, and one of the most important things to remember with this is that HMRC will only add basic rate tax, so 20% of the contribution. If you are a higher rate (40%) or additional rate (45%) tax payer then you must apply to receive the additional tax using your annual Self-Assessment Tax Return, this will not be done automatically.
This tax relief is due to you, so please be sure to make this part of your annual admin so you don’t miss out on the government adding to your pension.
There is more information on this using the link below.
https://www.gov.uk/tax-on-your-private-pension/pension-tax-relief
Redwood Financial is one of the Souths leading Pensions, Wills, Trusts & Estate Planning providers and we are dedicated to helping families to grow, protect and enjoy their wealth. With our unrivalled knowledge of pension and financial wealth planning, we can advise on any situation. Join us at one of our Free Public Information Seminars: Book online Book Me A Place!, Call us on 01489877 547 or Email info@redwoodfinancial.co.uk to book a FREE Initial Meeting with us to review your financial planning needs.
