Higher rate tax payers missing-out on pension and gift aid tax relief
“Employees who have been automatically enrolled into a workplace pension do not realise that they may need to claim tax relief on the contributions to their pension scheme as it is not given automatically,” says Tim Stovold, head of tax at Kingston Smith.
“Many employers operate ‘relief at source’ schemes where they deduct 80% of the contribution from an employee’s net pay and the pension scheme recovers 20% from HM Revenue & Customs. This is fine for basic rate taxpayers, but higher rate tax payers are missing out on valuable tax relief as they can claim a tax refund equal to 20% or 25% of their contribution via their tax return.”
“This tax relief is often missed by the squeezed middle who earn less than £100,000 as they are not required to complete a tax return. For example, a person earning £50,000 per year and making a 3% pension contribution could claim a £300 tax refund. At the same time as this claim is being made, it is worthwhile checking back to see what Gift Aid donations have been made too as the tax relief for these donations is similar and worthwhile claiming too.”