As we step into 2025, it’s time to focus on smart financial planning strategies that ensure you’re making the most of your money. This month, we’re spotlighting a crucial topic for higher-rate taxpayers: claiming back unclaimed pension tax relief.
Did you know that thousands of higher-rate taxpayers in the UK are leaving money on the table by not reclaiming the full tax relief on their pension contributions? For many, this oversight could mean missing out on thousands of pounds that could boost their retirement pots.
What You Need to Know About Pension Tax Relief
Higher-Rate and Additional-Rate Taxpayers May Need to Act Basic-rate tax relief (20%) is usually added automatically to your pension contributions. However, if you’re in the 40% or 45% tax bands, you’ll need to claim the extra 20% or 25% through a self-assessment tax return or by contacting HMRC.
Four-Year Window to Claim Pension tax relief can be claimed for the past four tax years. For the 2020-21 tax year, the deadline is April 5, 2025—act now to avoid missing out.
Significant Financial Benefits For example, a higher-rate taxpayer contributing £6,000 to a pension may only need to pay £3,600 out of pocket after reclaiming the additional tax relief.
Salary Sacrifice vs. Relief at Source If you’re using a salary sacrifice scheme, tax relief is applied automatically. However, for other arrangements like “relief at source,” you may need to proactively claim the additional relief.
Reclaiming Overpaid Tax on Pension Withdrawals For those accessing their pensions for the first time, emergency tax codes can result in overpayments. If this happens, you can reclaim your money by completing specific HMRC forms (P55, P50Z, or P53Z) or waiting for an automatic refund at the end of the tax year.
How to Claim Your Tax Relief
Submit your contributions on a self-assessment tax return (deadline: January 31, 2025, for the 2023-24 tax year).
Contact HMRC directly if you’re not required to file a self-assessment.
Arrange for your refund to be paid directly into your bank account or adjust your tax code for future savings.
Why It Matters
This isn’t just about reclaiming money—it’s about securing your financial future. With rising living costs and inflation impacting savings, making the most of tax-efficient strategies like this is essential for long-term security.
How We Can Help
At Cleveden Park Wealth, we specialise in tailored financial advice, including pension strategies and tax planning. Whether you’re a higher-rate taxpayer or simply want to ensure your financial plan is optimised, we’re here to help.
Book your free consultation today to learn more about how you can maximise your tax relief and take control of your retirement savings.
Let’s make 2025 the year you achieve your financial goals!
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