Millions Urged to Act Before Saturday's Pension Tax Relief Deadline
UK taxpayers are being reminded that they have just days left to potentially boost their pension savings by claiming valuable tax relief before the Saturday deadline. With millions of pounds in unclaimed relief estimated to be left with HMRC each year, financial experts are urging savers to take action.
Understanding Pension Tax Relief Limits
The current rules allow for tax relief on pension contributions within specific annual limits. For the 2023/24 tax year, the maximum contribution that qualifies for tax relief is £60,000, while for the previous 2022/23 tax year, the limit was £40,000. These figures represent the total contributions that can be made while still receiving tax benefits from the government.
The Carry Forward Rule Explained
For those who have exceeded their Annual Allowance in the current tax year, there is a valuable provision known as the carry forward rule. This allows savers to utilize any unused allowances from the previous three tax years, potentially enabling significantly larger contributions with tax relief.
This strategy can be particularly advantageous for individuals who have experienced:
- Lower income in previous tax years
- Recent spikes in earnings
- Changes in employment status
To qualify for using carry forward, you must have been a member of a UK-registered pension scheme during the tax years from which you wish to carry forward unused allowances.
The Self-Assessment Requirement
While basic rate tax relief is typically added automatically to pension contributions by providers operating relief at source schemes, higher and additional rate taxpayers often need to take additional steps. If you earn above the higher rate threshold and contribute to a relief at source pension, you may need to complete a Self-Assessment tax return to claim your extra tax relief.
According to industry estimates, this additional relief averages around £425 for higher rate taxpayers, representing a significant boost to retirement savings that many are missing out on.
Millions at Risk of Missing Out
Recent analysis reveals the scale of unclaimed tax relief in the UK. PensionBee estimates that approximately £1.3 billion was left unclaimed with HMRC between 2016 and 2021 by higher and additional rate taxpayers alone. Furthermore, it's estimated that over 5 million taxpayers have yet to complete their Self-Assessment forms for the previous tax year.
Lisa Picardo, chief business officer UK at PensionBee, emphasized the urgency: "Getting your ducks in a row before 31 January is crucial. For many, completing a tax return could unlock unexpected pension benefits. If you've changed jobs, started self-employment or entered a higher tax bracket, filing ensures you don't leave valuable tax relief unclaimed."
Taking Action Before the Deadline
With the Saturday deadline fast approaching, financial advisors recommend several steps:
- Review your pension contributions for the last four tax years
- Calculate potential unused allowances using the carry forward rule
- Determine if you need to complete a Self-Assessment return
- Use available calculators to estimate potential tax relief
Picardo added: "Our tax relief calculator can help provide clarity on how much tax relief could be added to your pension pot, and help you understand whether or not you may need to file a Self-Assessment tax return to claim a portion of it."
The message from financial experts is clear: taking action before Saturday's deadline could transform your retirement planning and ensure you're not leaving government-backed pension benefits on the table.
