I’ve been paying into my workplace group personal pension (GPP) for just over three years and only just realised I’m missing out on pension tax relief. I earn £70,000 a year and pay about £5,000 of this into my GPP (matched by my employer).

However, I’ve only been receiving basic-rate (20%) tax relief through the scheme. What do I need to do to get the extra 20% tax relief I am owed?

Izzy

Tom Selby, AJ Bell Senior Analyst says:

Anyone who saves in a pension scheme is entitled to tax relief, although you can only receive tax relief on contributions up to 100% of your UK earnings.

The relief you get effectively reclaims the tax you have paid on the earnings that you have now put into your pension. For example, if you are a basic-rate taxpayer you will get 20% tax relief, while if you have paid a higher level of tax on some of your earnings you can get this back too.

There is an annual limit to the amount you can save into your pension before you are hit with tax charges. For most people, the annual limit is £40,000, although for those who have flexibly accessed taxable income from their pension the annual allowance is much lower (£4,000).

In addition, people with total taxable income of £110,000 or more could see their annual allowance reduced to as low as £10,000. You can find more information on this here.

How you get tax relief depends on the type of scheme you are contributing to. If you are in a ‘net pay’ scheme, where your pension contributions are taken from your pre-tax income, you will automatically receive all the tax relief you are due.

If you are in a ‘relief at source’ scheme, 20% tax relief will be added to your contribution automatically in the pension scheme – even if you aren’t paying income tax (i.e. people earning below the personal allowance, which is currently set at £12,500). This is different to a net pay scheme where these people lose out on this valuable benefit.

However, if you are a higher or additional-rate taxpayer under a relief at source scheme (or an intermediate or top-rate taxpayer in Scotland), you will need to claim back your extra relief via your self-assessment tax return for the year in which you made the contribution.

Your extra tax relief should then be provided via a reduction in the income tax you have to pay in the following tax year.

You can find more information on how to do this here.

If you have not claimed the additional relief for a previous tax year you can submit an amended self-assessment return (online or a paper return) up to a year after the usual self-assessment deadline – for example up until 31 January 2021 for the 2018/19  tax year.

If you need to make a change to your return for any other year you’ll need to write to HMRC – although you might not get your money back if the claim is more than four tax years ago.

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Please note, we only provide guidance and we do not provide financial advice. If you’re unsure please consult a suitably qualified financial adviser. We cannot comment on individual investment portfolios.

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