Want to make the most of your pension savings?  Here we look at how you can boost your retirement pot with HMRC incentives.

Tax relief on private pension contributions is generally available up to 100% of your annual earnings, subject to specific limitations. The relief is paid on pension contributions at your highest rate of Income Tax paid, which means:

• Basic rate taxpayers are eligible for a 20% pension tax relief

• Higher rate taxpayers can claim a 40% pension tax relief

• Additional rate taxpayers are entitled to 45% pension tax relief.

For individuals paying the basic income tax rate, the initial 20% pension tax relief is usually applied automatically by your employer, with no further action required by you.

Higher and additional rate taxpayers can claim the additional relief through their self-assessment tax return as follows:

• An additional 20% relief on income taxed at 40%

• An additional 25% relief on income taxed at 45%.

Alternatively, if you are subject to 40% income tax and do not submit a self-assessment return, you can contact HMRC directly to request the relief.

These tax relief rates apply to taxpayers in England, Wales, and Northern Ireland. It is important to note that Scotland has some regional variations for Income Tax rates.

In addition, there is an annual allowance for tax relief on pensions of £60,000.  You have the opportunity to carry forward any unused portion of this allowance from the previous three tax years, provided you made pension contributions during those years.  As of 6 April 2023, the lifetime limit for pension tax relief was abolished, offering greater flexibility in pension contributions without the previous lifetime cap.

For more information on pension tax relief, or any other tax or accounting queries, please get in touch.

Internet link:GOV.UK