‘I’m a pensions expert – four ways completing a | European Markets

Lacking the HMRC self-assessment deadline might imply shedding out on lots of – if not hundreds – of kilos in unclaimed tax aid, warns a pensions professional.

Tax returns for 2023/24 should be filed by January 31, together with submitting claims for tax aid – an alternative some people might not realise they’re eligible for.

Lisa Picardo, chief business officer at PensionBee commented: “It’s estimated that over five million taxpayers are yet to fill out their Self-Assessment form for the previous tax year, so getting your ducks in a row before January 31 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.”

Greater earners can declare additional tax aid

Within the five-year period between 2016 and 2021, PensionBee estimates that round £1.3billion was left to HMRC in unclaimed tax aid from greater and extra price taxpayers.

Suppliers working ‘relief at source’ pension schemes robotically add primary price aid to pension contributions. Greater-rate taxpayers are entitled to an additional 20% aid, however they need to actively declare it.

Ms Picardo stated: “If you earn more than £50,270 and pay into a ‘relief at source’ pension, you might need to fill out a Self-Assessment return to claim your extra tax relief, which is an estimated £425 on average for a higher rate taxpayer.”

Carry tax aid ahead

The annual contribution restrict for the 2023/24 tax yr is £60,000. That is the utmost you possibly can contribute to your pension and nonetheless get tax aid for that yr.

In the event you didn’t use the total contribution restrict in earlier years (for instance, in 2022/23, the restrict was £40,000), you possibly can carry ahead the unused allowance from these years and add it to this yr’s restrict.

So, in case you didn’t contribute up to the £40,000 restrict in 2022/23, and also you’re contributing the total £60,000 in 2023/24, you may use that unused £40,000 from 2022/23 and contribute up to £100,000 in whole throughout each years (as long as you meet the situations).

Ms Picardo stated: “To use carry forward, you must have been a member of a UK-registered pension scheme in the tax years you wish to carry forward from.”

Pension contributions can cut back taxable income for some

In the event you’re self-employed, pension contributions can cut back your taxable income, serving to you save on tax whereas building your retirement financial savings.

Ms Picardo stated: “Contributions are treated as a personal expense eligible for tax relief rather than a business expense, so they reduce your taxable income directly.

“For example, if you earn £60,000 and make £10,000 in pension contributions, your taxable income is reduced to £50,000, potentially lowering your overall tax bill.

“Unlike employees in workplace schemes, who typically receive automatic tax relief, self-employed individuals need to claim this relief actively, usually through Self-Assessment.”

An opportunity to review your general financial scenario

Finishing a tax return permits people to review their financial scenario and make essential changes.

Ms Picardo stated: “It’s essential to check with your employer or financial adviser to confirm that tax relief has been applied to your pension contributions – or if a claim needs to be made.

“Even if you’re not eligible for additional tax relief this year, reviewing your income, savings, and tax situation holistically ensures you’re making the most of available opportunities and could help avoid missing out on future benefits.”

Individuals can use PensionBee’s tax aid calculator to examine how a lot tax aid may very well be added to their pension pot.

HMRC says the “quickest and easiest” approach to full a tax return and pay any tax owed is to make use of HMRC’s online providers. Go to the GOV.UK web site and search ‘Self Assessment’ to get began.