Background
Tax relief is available on personal contributions to a registered workplace or personal pension scheme. Tax relief is usually given automatically however in some instances taxpayers are required to claim the relief themselves. This can be the case where:
- a taxpayer pays income tax at a rate above 20% and the pension provider re-claims the first 20% (relief at source)
- the pension scheme is not set up for automatic tax relief
- someone else pays into the pension.
Details
If a taxpayer pays income tax at a rate above 20% a claim would usually be made via their Self Assessment tax return for the additional tax relief due. However taxpayers who are taxed solely under Pay As You Earn (PAYE) are unlikely to be required to file a tax return and would therefore previously have needed to write to HMRC for the additional relief. To speed up this process for these taxpayers HMRC have now introduced an online form, with the aim of responding to claims within 28 days. To use the new online form the taxpayer:
- must have paid into either a personal or workplace pension scheme other than under a net pay arrangement;
- must have paid income tax at a higher rate than the basic rate of 20%, for example at 40% or 45%;
- must not be in Self Assessment, where a claim is made via the tax return.
An individual should be able to confirm either with their employer or with their pension scheme whether they are contributing under a net pay arrangement or via relief at source.
HMRC’s guidance sets out the information needed to make a claim online, including proof from the pension provider of the payments made, and taxpayers will need a Government Gateway account to use the online form. For any taxpayers who are unable to use the online form or for those using an agent, postal claims will still be required.
If you would like further information on tax relief on pension contributions or the new online form, please contact our Tax Director, Jenny Marks.
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