| Are you missing out on Pension Tax relief? |
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June 2008 If you were lucky enough to pick the front runner in the 3.45 at Newmarket, win the National Lottery or even the office sweepstake, you´d be quick enough to collect your dues. How come then, that when it comes to claiming the tax relief on a pension, people are often content to sit back and assume it will make its way to them? Through a very simple misunderstanding they miss out on substantial reliefs –of up to 20 percent - that are theirs by right, says Henry Hayden, an Independent Financial Adviser with LB Wealth Management, part of the LB Group. Leading pension provider, Standard Life, found that around a quarter of a million people believe they will automatically receive 40 percent relief, as higher rate tax payers, on their contributions. But, as a member of a money purchase scheme (such as Group Person or Stakeholder pensions), Personal Pension schemes or SIPP (Self Invested Personal Pension) they will only receive a basic tax relief of 20 percent automatically. You can also slip through the net if you were a basic rate tax payer when you joined a pension scheme, but through promotion or salary increases you now pay higher rates of tax. (Employers often forget to tell staff to start claiming higher rate relief on a pension when this happens.) How to claim your dues You must first file a tax return or arrange for HM Revenue & Customs to change your tax code. You can do this easily via your accountant or Independent Financial Adviser and a claim can be made retrospectively for up to five years and ten months after the relevant year end. You will, of course, have to declare the income you receive from savings, investments (excluding ISA´s) but almost certainly the gain in terms of higher rate pension tax relief will far outweigh the time and effort involved.
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