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.
-
8 of the best houses for sale for around £500,000Some of the best houses for sale for around £500,000 – from a 19th-century stone farm cottage in North Yorkshire and a two-bedroom apartment in Edinburgh’s New Town to a converted Methodist chapel in Norfolk
-
What will the unravelling of US-China trade mean for the economy?What will a US-China decoupling mean for the global economy?
-
HMRC crackdown on workers who earn extra income comes into force - what tax do you need to pay?New rules have come into effect allowing the taxman to get a closer look at the extra income people are making through selling items online or renting out properties on Airbnb. We explain what it may mean for your tax bill.
-
Inheritance tax receipts rise by £500m as Chancellor mulls cutsNews More estates are paying inheritance tax but there are ways to reduce the bill without waiting for reforms
-
Topping up state pension to become easier with new online toolAnyone looking to buy extra National Insurance contributions and boost their state pension currently has to make multiple phone calls - but a new online tool is on its way.
-
Self-assessment tax scam warnings raised ahead of tax return deadlineSelf-assessment tax scams are on the rise according to HMRC. We look at the common scams and how to safeguard yourself
-
Act now to bag NatWest-owned Ulster Bank's 5.2% easy access savings accountUlster Bank is offering savers the chance to earn 5.2% on their cash savings, but you need to act fast as easy access rates are falling. 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 wonNS&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
-
Inheritance tax receipts hit a record year as it hits £3.2bnHMRC is collecting more and more in inheritance tax due to fiscal drag. We explain how you can minimise your bill.
