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\t\tHigh earners could be losing thousands in pension tax relief \t<\/p>\n\t\t\tMonday 19 January 2026 4:47 pm\n\t\t\t<\/p>\n
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\t\tHigh earners could be losing thousands in pension tax relief \t<\/p>\n
High earners could be at risk of losing a quarter of a million pounds in pension tax relief through failing to reclaim by the self-assessment tax return deadline.<\/p>\n
Brit ensnared in the \u00a3100,000 tax trap could see thousands of pounds slipping out of their grasp, as well as valuable free childcare support, according to wealth and asset management group Rathbones.\u00a0<\/p>\n
While 20 per cent basic tax relief is automatically applied to pension contributions made into private pots, higher rate taxpayers are entitled to reclaim an additional 20 per cent through the self-assessment tax return.<\/p>\n
Meanwhile, additional rate taxpayers <\/a>can reclaim a further 25 per cent.<\/p>\n Once a household earns above the \u00a3100,000 threshold, free childcare hours are stripped away, regardless of what other household members earned, while taxpayers earning between \u00a3100,000 and \u00a3125,140 face a marginal tax rate of 60 per cent due to the tapering away of the tax-free personal allowance.<\/p>\n However, being dragged across the threshold means taxpayers can claim an additional 40 per cent tax relief upon the 20 per cent automatically applied.<\/p>\n Lost wealth<\/p>\n Based on a \u00a310,000 annual pension contribution, assuming the pension is achieving five per cent growth with contributions increasing in line with inflation, failing to reclaim the extra relief could result in staggering losses over the next two decades for those within the 60 per cent tax band.<\/p>\n \t\t\t\t\tRead more<\/p>\n \t\t\tHENRYs set for further Budget blow as more dragged into \u00a3100K tax trap<\/a><\/p>\n In a single tax year \u00a35,000 could be lost, jumping to \u00a389,666 after ten years, before surpassing \u00a3250,000 after 20 years.<\/p>\n If investment returns were higher,<\/a> reaching seven per cent, the lost pension wealth would top \u00a3300,000 after 20 years.<\/p>\n Ed Wood, Senior Financial Planner at Rathbones, said: \u201cEarning just above \u00a3100,000 puts people in one of the most punitive tax positions in the UK, but it also creates an opportunity.\u00a0<\/p>\n \u201cBy giving up a small slice of heavily taxed income, individuals can not only stay eligible for important childcare support but also supercharge their retirement savings.\u00a0<\/p>\n \u201cThe numbers speak for themselves, a modest sacrifice today can snowball into a sizeable sum tomorrow thanks to investment growth and compounding.\u201d<\/p>\n Claiming back missed relief <\/p>\n