Are You Owed Money? Exploring Unclaimed Pension Tax Relief in the UK  

Did you know that over £1.3 billion of pension tax relief has gone unclaimed by the highest earners in the UK?  

The pension provider PensionBee analysed unclaimed pension relief between 2016 and 2021, and revealed a staggering amount of unclaimed tax has gone to the tax man. 

Is some of the unclaimed tax relief yours?  

To optimise your tax relief it is crucial you understand and claim the tax relief you are entitled to. Read on to explore what pension tax relief is and how to make the most of it. Let’s get started.  

What is Pension Tax Relief? 

Pension tax relief is the government’s way of encouraging individuals to save for retirement by boosting their pension contributions. It’s one of the most tax-efficient savings methods available.  

Here’s how it works

Basic-rate taxpayers: For every £100 you contribute to your pension, it effectively costs you only £80, thanks to a 20% top-up from the government. 

Higher-rate taxpayers: As a higher-rate taxpayer, you only pay £60 for every £100 contributed to your pension due to a 40% tax relief. 

Additional-rate taxpayers: Individuals in the additional-rate category pay only £55 for every £100 contributed to their pension, thanks to a 45% tax relief. 

Even if you have no taxable income or earn less than £3,600 in a tax year, you can still benefit from a 20% tax relief on contributions up to £2,880.  

It is important to note this doesn’t mean you won’t have to pay tax on that money in the future, simply that you don’t have to pay tax on it now. 

Keep in mind that income tax rates vary across the UK. The calculations above relate to non-Scottish taxpayers.  

How much tax relief can you get? 

You can only get tax relief on your payments up to your Pension Annual Allowance.

For the 2023/24 tax year, this is £60,000 or your total salary, whichever is lower, and you could face a tax charge if you go over this amount. 

Why is tax relief left unclaimed? 

Despite the significant advantages of pension tax relief it is not automatically applied therefore higher-rate and additional-rate taxpayers must proactively claim their relief.  

Also the process can vary, as it depends on your pension plan and your employer’s pension scheme. If you’re part of a net pay arrangement, tax relief is automatically applied. With a relief at source arrangement, you need to claim the additional tax relief yourself, which many taxpayers are unaware of.  

We strongly advise you speak to an expert who can look at your unique circumstances.  

How to Claim Your Tax Relief  

If you are a  higher or additional rate taxpayer follow these steps to claim your extra tax relief: 

Step 1 Determine Your Arrangement:  

Find out if you’re in a net pay arrangement (no action required) or a relief at source arrangement (action required). 

Step 2 Complete a Self-Assessment Tax Return:  

To claim your additional tax relief, fill out a self-assessment tax return by the deadline of 31 January (online) or 31 October (paper). 

Step 3 Receive Your Relief:  

You’ll get the tax relief either as a rebate or an adjustment to your tax code. 

Remember, the amount of relief you receive may change based on changes to your pension contributions or salary. 

Can you claim tax relief for previous years? 

Yes, you can claim tax relief for the previous four tax years only. 

Don’t miss out on valuable tax relief 

Ultimately, pension tax relief is a valuable benefit that can significantly boost your retirement savings. Talk to an expert to fully understanding your eligibility in the context of the type of arrangement you have, and how to claim your relief. That way you ensure you don’t miss out on money that could be in your pension pot. 

Contact Emily Wilson expert tax advice

The information here is based on our understanding September 2023 and shouldn’t be taken as financial advice. 
Please note a pension is an investment and its value can go down as well as up and may be worth less than was paid in. 
Your own personal circumstances, including where you live in the UK, will have an impact on the tax you pay. Laws and tax rules may change in the future.