HMRC has made a major change to pensions which will allow people to save money on their tax bill instantly instead of having to go through a long-winded self-assessment process. The taxman has introduced a new quick access online system to report tax relief on private pensions. It means that if you put money into a private pension yourself, you could instantly claim the money back off your tax bill.
While most people pay into their pension automatically via their employer via PAYE, with the money deducted from your pay before you ever see it, many people choose to make additional pension payments into another pension they set up, such as a SIPP. This has the benefit of saving more money for retirement without paying tax on it, and you can also reduce your tax bill and even lower your tax band too.
For example, if you were set to go over the £50,270 tax threshold for the higher 40% tax band, you would lose £500 from your Personal Savings Allowance, meaning you’d owe 40% tax on any savings above £500, which could be hundreds. But if you made a private pension contribution, it could lower your tax threshold back under £50,270.
Regardless of whether it lowered a tax band, you would still benefit from being able to quickly and easily reclaim money off your tax from private pension contributions.
Posting on UKPersonalFinance sub-Reddit, u/hotwetcheatinmachine said: “Rejoice! You can now claim tax relief on pension payments directly through the HMRC website.
“HMRC have launched a new beta system for claiming tax relief on private pension contributions (they’re also inviting users to give feedback on it).
“This means no more printing out statements to send via snail mail, and no more self assessment for a lot of us – we’re in the 21st century now!”.
HMRC says: To be eligible to claim tax relief you must be: a basic rate taxpayer that pays into a workplace pension but the employer does not or will no longer claim tax relief.
“A basic rate taxpayer that pays a lump sum into a personal or workplace pension that is not under a net pay scheme.
“An intermediate rate taxpayer or a higher rate taxpayer that pays into a personal or workplace pension.
“We will review your claim and contact you within 28 working days.”
To claim, go here.
