If you’re completing your 2021/22 self-assessment tax return over the next few days, don’t forget to declare your pension contributions to help reduce your overall tax bill. The deadline to complete the self-assessment tax return by the end of January is fast-approaching, yet according to HMRC, 5.7 million people are yet to file theirs.
Taxpayers routinely omit vital pensions data from their tax returns, forfeiting valuable tax relief or underpaying tax.
Higher-rate taxpayers are most at risk of missing out. If you make regular contributions to a private pension, such as a stakeholder or personal plan, your provider will automatically claim basic-rate income-tax relief on your behalf, reducing the cost of contributing by 20%. But higher-rate and additional-rate taxpayers are entitled to a further 20% and 25% respectively; this relief can only be claimed by declaring your contributions on your annual tax return, so if you don’t provide this information – or you don’t make a return – you won’t get it. Around 250,000 taxpayers make this mistake.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The other side of the coin is that anyone exceeding their annual pension contribution allowance must declare this on their tax return. For most people, the annual allowance is £40,000, though it maybe higher or lower depending on your circumstances. for example, if you are a high earner with an income of £240,000, you annul allowance could be just £4,000 per tax year.
If you’ve gone over your allowance – which by the way is your responsibility to check – you must tell HMRC. You’ll then pay a tax charge. Failing to declare this information means you’ll be paying too little tax, so interest and penalty charges could become payable when the error comes to light.
Already completed your tax return? Don't worry, you still have until 31 January 2023 and can still go in and make changes.
You can add pension details to your tax return under the ‘tax reliefs’ section.
-
NatWest-owned Ulster bank boosts easy access savings rate to 5.2%Rates on easy access savings accounts have hit over 5%, with Ulster Bank now giving savers the chance to earn 5.2% on their cash savings. We have all the details.
-
Moneybox raises market-leading cash ISA to 5%
Savings and investing app MoneyBox has boosted the rate on its cash ISA again, hiking it from 4.75% to 5% making it one of top rates. We have all the details.
-
October NS&I Premium Bonds winners - check now to see what you won
NS&I Premium Bonds holders can check now to see if they have won a prize this month. We explain how to check your premium bonds
-
October’s NS&I Premium Bond winners revealed - have you scooped £1 million?
Two lucky NS&I Premium Bond winners are now millionaires this October. Find out here you are one of them
-
The best packaged bank accounts
Advice Packaged bank accounts can offer great value with useful additional perks – but get it wrong and you could be out of pocket
-
Energy bills to fall 7% under new price cap
Energy bills could fall by an average 7% from October under the new Energy Price cap announced today. We explain what the new cap mean for you and when it will come into play
-
Bank of Baroda closes doors to UK retail banking
After almost 70 years of operating in the UK, one of India’s largest bank is shutting up shop in the UK retail banking market. We explain everything you need to know if you have savings or a current account with Bank of Baroda
-
The best options to earn cashback on spending
From credit cards and current accounts to cashback websites, there are plenty of ways to earn cashback on the money you spend.
