Under-75 Pension Tax Relief
People aged under 75 could be missing out on valuable pension tax relief if they are not making the most of the rules around pension contributions.
HMRC confirms that UK residents under 75 can normally receive tax relief on pension contributions, subject to limits. Relief is generally available on contributions up to 100% of UK taxable earnings, or £3,600 where the relevant earnings limit is lower.
Where Does £10,710 Come From?
The £10,710 figure should not be viewed as a guaranteed Government payment.
The amount someone can benefit from depends on their earnings, pension contributions, tax rate and the type of pension scheme they use.
For example, higher-rate taxpayers may be able to claim additional tax relief on qualifying pension contributions beyond the basic 20% relief already added by some pension providers.
This means some workers could be leaving tax relief unclaimed if they do not check how their pension contributions are treated for tax purposes.
How Pension Tax Relief Works
With a relief-at-source pension, the provider normally claims 20% tax relief from the Government and adds it to the pension.
If you pay Income Tax above the basic rate, you may be able to claim additional relief through Self Assessment or HMRC, depending on your circumstances.
For people who do not pay Income Tax, tax relief can still be available on pension contributions, generally up to £2,880 paid by the individual in a tax year, with the provider claiming tax relief to make the contribution £3,600.
Check Your Pension
Under-75s should check their pension statements and understand whether their contributions are receiving the tax relief they are entitled to.
The important point is that £10,710 is not a universal payment or guaranteed pension bonus. The actual benefit depends on individual circumstances.
Anyone unsure whether they are receiving the correct tax relief can check with their pension provider or HMRC before making further contributions.