1.To claim tax relief on ‘relief at source’ pension contributions
In the five-year period between 2016 and 2021, PensionBee estimates that around £1.3 billion was left to HMRC in unclaimed tax relief from higher and additional rate taxpayers. Only basic rate relief is added automatically to pension contributions by providers operating ‘relief at source’ pension schemes. If you earn more than £50,270 and pay into a ‘relief at source’ pension, you might need to fill out a self-assessment return to get your extra tax relief, which is an estimated £425 on average for a higher rate taxpayer.
2. To state whether contributions have exceeded the Annual Allowance or Money Purchase Annual Allowance, and whether ‘carry forward’ rules are being applied.
For the 2022/23 tax year, the old Annual Allowance of £40,000 (it went up to £60,000 for 2023/24) still applies. To benefit from tax relief on pension contributions, total pension contributions have to be within certain limits. Contributions exceeding the Annual Allowance would need to be applied to any unused allowance from the three previous tax years through ‘carry forward’, to still get relief. For very high earners who earned more than £240,000 of ‘adjusted’ income in 2022/23 (or more than £260,000 for 2023/24), the tapered annual allowance applies and can reduce the amount that can go into a pension to £4,000 for 2022/23 (£10,000 a year from 202/24).
For anyone who had already started to take taxable income from their pension, the Money Purchase Annual Allowance of £4,000 is the maximum amount they could pay in and still get tax relief for the tax year 2022/23. This limit went up to £10,000 for 2023/24. Carry forward can no longer be used once the MPAA is triggered.
3. You’ve started making withdrawals from your pension
The first taxable withdrawal someone makes from their pension pot is usually completed using what’s called a ‘month 1 emergency tax code’, which often results in an overpayment of tax - as well as a bit of a shock. Overpaid tax can be claimed back from HMRC and this is usually done via a special form and adjustment to someone’s tax code. However, it’s also possible to wait until the end of the tax year and get a refund after filing a self-assessment tax return. It may be possible to avoid this overpayment in the first place by providing an up-to-date tax code or P45 to your pension provider before the withdrawal is made.
Becky O’Connor, Director of Public Affairs at PensionBee, said: “Do I need to fill out a tax return?” is a question we all ask at some point - and there may be some good pension-related reasons you need to do so, even if you’ve never filled one out before and have no other reason to fill one out.
“This might especially apply to you if you have recently changed jobs and are now paying higher rate tax and are in a relief at source scheme. Or, if you were already in one but have had a pay rise and might now need to claim extra tax relief.
“It might also be worth checking the details of any pension you have paid into in the last four tax years, as you might have been missing out on tax relief owed to you without realising.”
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