Monday, February 24, 2020

High Earners Miss Out On £1 Billion A Year Tax Saving

Must read

Spending Cash Is Becoming A Thing Of The Past

The days of handing over cash could be numbered as the economy is in a shift to digitisation, warn campaigners.

Business Angels In Call To Ditch EU Investment Handicaps

Fund managers are worried that a Brexit trade deal will see the government scrap or restrict tax breaks on hugely successful investment schemes that...

Global Giant Shuts Poor Performing Funds

Investors choosing to pull their cash from wealth manager Jupiter have triggered the closure of two under performing funds. The global investment giant has announced...

Super Tax Refunds On The Way For 2.6m Aussie Savers

Millions of Australian superannuation savers are set to pick up a surprise cash payment from the taxman. Around 2.6 million saving for retirement in a...

High earners are missing out on £1 billion a year in tax relief because they do not put money into a pension or fail to claim a top-up on their contributions from the tax man.

Pension provider Prudential has revealed a quarter of workers paying tax at 40% or 45% do not contribute to a pension and claims they could gain at least £1,000 a year in tax relief if they started saving.

Also, thousands of high earners only receive 20% tax relief instead of the higher rates because they do not know how to reclaim the money they are owed.

The financial firm says HM Revenue & Customs (HMRC) figures show that 4.4 million earners paid tax at 40% or 45% in the 2013-14 tax year and 23% are not paying into a pension.

Their experts have calculated these high earners have an average salary of £50,200 and putting 5% of that into a pension – £2,500 a year – would save them around £1,000 in tax.

Claiming relief

Some could save even more if their employer also contributed to their pensions.

Many are also receiving lower tax relief than they are owed by HMRC.

Contributions into pensions automatically pick up 20% tax relief, which makes every £80 paid in worth £100, but higher and additional rate taxpayers have to stake a claim for the extra top-up of 20% or 25% by submitting a self-assessment tax return each year.

Not claiming the higher contribution relief cuts the £1,000 tax saving in half.

Higher rate taxpayers can make claims going back up to four years for tax relief they have missed, but this depends if the pension saver was required to submit a self-assessment tax return.

Making savings

Anyone making a claim should talk to their HMRC office to find out how the rules affect them.

Clare Moffat, a tax expert at Prudential, argued that many high earners make great efforts to save a few pounds by trimming household spending but do not bother to claim pension contribution relief that can add up to hundreds of pounds each year.

“It makes sense for any high earner to pay as much as they can into a pension,” she said. “The more they pay in, the more pension tax relief they can claim and the larger their pension pot grows.

“Significant numbers of higher rate taxpayers fail to realise this and are missing out on what is basically free money that only costs them a little time in form filling or talking to the tax office to sort out.”

- Advertisement -

More articles

LEAVE A REPLY

Please enter your comment!
Please enter your name here

- Advertisement -

Latest article

Spending Cash Is Becoming A Thing Of The Past

The days of handing over cash could be numbered as the economy is in a shift to digitisation, warn campaigners.

Business Angels In Call To Ditch EU Investment Handicaps

Fund managers are worried that a Brexit trade deal will see the government scrap or restrict tax breaks on hugely successful investment schemes that...

Global Giant Shuts Poor Performing Funds

Investors choosing to pull their cash from wealth manager Jupiter have triggered the closure of two under performing funds. The global investment giant has announced...

Super Tax Refunds On The Way For 2.6m Aussie Savers

Millions of Australian superannuation savers are set to pick up a surprise cash payment from the taxman. Around 2.6 million saving for retirement in a...

Builders Scamming Online Find-A-Trader Sites

Unscrupulous builders are scamming online find-a-trader platforms by bribing customers to post fake reviews, a web site owner claims. Even though thousands of home owners...