With the annual deadline for completing a self-assessment tax return now less than seven days away, taxpayers have been warned to claim “thousands” in a pension boost.
Anyone earning more than £50,000 per year who fails to complete their tax return on time may miss out on valuable tax relief if they have made any pension contributions.
All tax returns are due by midnight on 31 January, and almost 3.5 million have not filed their tax return for the 2021/22 tax year. Approximately 12 million people are expected to file this January.
Freelancers, the self-employed, small business owners and partners, private landlords and those earning more than £100,000 per year need to file a tax return.
Individuals with more than £10,000 income from savings or investments outside of a tax-free ISA, or overseas income and gains on Bitcoin and other cryptocurrencies also need to file.
Jenny Holt, managing director, customer savings and investments at Standard Life reminded eligible taxpayers that they could miss out on a valuable pension boost if they failed to file by January 31.
"Savers automatically receive 20 percent tax relief on every contribution they make, but higher and additional rate taxpayers need to claim the extra 20 or 25 percent tax relief”, she told MSN. This money is repaid either through a rebate, a change in tax code or a reduction in this year’s tax bill.
Maxing out tax relief is particularly important for those earning between £100,000 and £125,140. Facing an effective tax rate of 60 percent, individuals in this bracket can reduce that by making pension contributions to lower their income.
Paying these extra pension contributions can also help families impacted by the High Income Child Benefit Charge, applied when one parent earns more than £50,000.
For every £100 of income over £50,000, this bracket of earners pay back one percent of the child benefit. If the income exceeds £60,000, the full amount must be repaid.
Additional tax relief can also be claimed through donations to charity via Gift Aid when that individual pays a higher rate of tax.
In 2022, two million taxpayers missed the January 31 deadline and received an instant fine of £100 plus interest on late tax due.
