substantial sums<\/a> being left unclaimed.<\/p>\nHe said: \u201cWe regularly see people paying higher-rate tax who assume all their pension tax relief is handled automatically.<\/p>\n
Here are the current tax bands for the 2025\/26 tax year:<\/p>\n
Personal allowance: \u00a30-\u00a312,570 (0 per cent tax)<\/p>\n
Basic rate: \u00a312,571-\u00a350,270 (20 per cent tax)<\/p>\n
Higher rate: \u00a350,271-\u00a3125,140 (40 per cent tax)<\/p>\n
Additional rate: Over \u00a3125,140 (45 per cent tax)<\/p>\n
\u201cIn many cases, it isn\u2019t, and the result is money being left on the table that HMRC won\u2019t pay back unless it\u2019s claimed.\u201d<\/p>\n
HMRC figures show that nearly 7.1 million people \u2013 nearly one in five taxpayers in the UK \u2013 will pay higher-rate income tax in the current tax year. That\u2019s up 38.7 per cent in three years, from 5.1 million in the 2022\/23 tax year.<\/p>\n
These increases are largely because income tax thresholds have been frozen since April 2021 and are expected to remain unchanged until at least 2028.<\/p>\n
About 1.23 million will pay the additional rate, the data shows.<\/p>\n
Penfold estimates that a significant proportion of these savers may be eligible for further pension tax relief, particularly those contributing to personal pensions or workplace schemes using the relief at source system.<\/p>\n
What pension tax relief means in practice<\/p>\n
Pension tax relief is designed to encourage saving for retirement by refunding income tax on pension contributions.<\/p>\n
For most personal pensions, providers automatically add basic-rate relief of 20 per cent.<\/p>\n
But higher-rate taxpayers are entitled to claim back the difference between their marginal tax rate and the basic rate.<\/p>\n
This means an extra 20 per cent for higher-rate taxpayers and an extra 25 per cent for additional-rate taxpayers.<\/p>\n
Eastwood highlighted the scale of the benefit, adding: \u201cFor someone paying 40 per cent income tax, a \u00a310,000 pension contribution could cost as little as \u00a36,000 once all tax relief is claimed.\u201d<\/p>\n
Pension contributions reduce the effective cost of saving by returning tax that would otherwise be lost, significantly boosting retirement savings over time.<\/p>\n
He continued: \u201cIf you don\u2019t claim the extra relief you\u2019re entitled to, you simply pay more tax than you need to.\u201d<\/p>\n
Who is most likely to be affected<\/p>\n
According to Penfold, higher-rate pension tax relief is most often missed by people who earn above the basic-rate threshold and pay into pensions using relief at source arrangements. This includes many personal pensions and some workplace schemes.<\/p>\n
Employees paying into pensions through salary sacrifice or net pay arrangements \u2013 where your contributions are taken from your pay before your wages are taxed \u2013 usually receive full tax relief automatically, as contributions are deducted before income tax is applied. For others, claiming additional relief requires action.<\/p>\n
The key is understanding how your pension scheme works, Eastwood said. His point underlines that different pension structures are taxed in different ways, and savers cannot assume the system works the same for everyone.<\/p>\n
If you don\u2019t know whether your pension uses relief at source, it\u2019s worth checking, especially before the January deadline, he urged.<\/p>\n
Why January matters<\/p>\n
While the 31 January self-assessment deadline does not require people to make new pension contributions, it is the cut-off for reporting income and claiming relief for the previous tax year.<\/p>\n
Eastwood said: \u201cJanuary is an important moment to review contributions made during the tax year and ensure any higher-rate relief is correctly claimed.<\/p>\n
\u201cClaiming pension tax relief isn\u2019t about gaming the system. It\u2019s about making sure people receive the tax benefit Parliament intended \u2013 and not paying more tax than they need to.\u201d<\/p>\n
How to claim higher-rate pension tax relief<\/p>\n
The self-assessment deadline is 31 January.<\/p>\n
You may need to claim pension tax relief if you pay higher or additional-rate income tax and contribute to a pension that uses relief at source.<\/p>\n
If you already complete a self-assessment tax return, pension contributions can usually be entered in the pensions section of the form.<\/p>\n
If you do not normally file a tax return, you may still be able to claim through HMRC\u2019s online service or by contacting HMRC directly.<\/p>\n
You will need details of your pension contributions and your pension provider.<\/p>\n
Employees in salary sacrifice or net pay pension schemes usually do not need to claim, as full tax relief is applied automatically.<\/p>\n
Failing to claim means the extra relief is not refunded, and HMRC will not apply it unless you take action.<\/p>\n","protected":false},"excerpt":{"rendered":"Now is a key moment to review pension contributions made during the current tax year, experts urge As…\n","protected":false},"author":2,"featured_media":255912,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[72,176,61,60,1558,174,175,1611,5066],"class_list":{"0":"post-255911","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-personal-finance","8":"tag-business","9":"tag-finance","10":"tag-ie","11":"tag-ireland","12":"tag-pensions","13":"tag-personal-finance","14":"tag-personalfinance","15":"tag-retirement","16":"tag-tax"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/255911","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/comments?post=255911"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/255911\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media\/255912"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media?parent=255911"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/categories?post=255911"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/tags?post=255911"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}