Pensioners could be missing out on £1billion in tax relief from HM Revenue and Customs (HMRC), however a recent rule change could impact how retirees make a claim for this support.
New regulations introduced by HMRC on September 1 have tightened the requirements for pension tax relief claims, with taxpayers now needing to provide supporting documentation regardless of the contribution amount.
The changes eliminate the previous £10,000 threshold that allowed smaller contributors to claim without evidence, with AJ Bell urging older Britons to check if they could be affected.
Under the revised system, anyone seeking higher or additional rate tax relief must obtain proof of their pension contributions from their provider before submitting a claim to HMRC.
HMRC has toughened pension tax relief rules
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This affects those in "relief at source" schemes and personal pensions such as SIPPs, where tax relief is applied after income tax has been deducted.
Millions of workers earning above £50,270 annually could be losing thousands in unclaimed pension tax relief, with those recently entering the higher-rate bracket particularly vulnerable to missing out.
Analysis by PensionBee previously found that the UK’s highest earners left a staggering £1.3billion of unclaimed pension tax relief to the taxman between 2016/17 and 2020/21.
Wage growth combined with static tax thresholds since 2021 has pushed unprecedented numbers into the 40 per cent tax band who may be unaware they're entitled to claim an extra 20 per cent relief beyond the automatic 20 per cent applied to their contributions.
Could you be entitled to pension tax relief?
| GETTYScottish taxpayers face additional complexity with intermediate rate bands requiring separate claims.
Workers in "relief at source" arrangements are especially affected, as they must actively pursue the additional relief rather than receiving it automatically through their payroll.
Charlene Young, senior pensions and savings expert at AJ Bell, emphasises the importance of understanding your pension arrangement.
She explained: "If you have a salary sacrifice or net pay scheme, you will not need to worry about claiming your own tax relief."
Ms Young has suggested taxpayers check payslips to identify their scheme type and National Insurance number for any claims.
Workers in "net pay" arrangements receive full relief automatically as contributions are deducted before tax.
In comparison, those in "relief at source" schemes must claim the additional 20 per cent or 25 per cent themselves after the basic rate relief is applied.
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Many Britons rely on pension tax relief | GETTY The claiming process requires accessing the Government's online portal through a Government Gateway account, where taxpayers must provide employment details, payroll numbers and contribution amounts typically found on P60 forms or payslips.
Ms Young notes that pension providers must now supply evidence of contributions.
She added: "If you can't find this when you login to your pension account, or through the provider's app if they have one, then you may need to contact the pension company and ask them to send it to you."
AJ Bell has previously highlighted alternative routes, which include incorporating claims within self-assessment returns or postal applications, though these take longer to process than digital submissions.