Blog » How adding pension contributions to your self-assessment form could increase your tax relief

How adding pension contributions to your self-assessment form could increase your tax relief

January 4, 2023
The details provided in this article are for general information only and are in no way deemed to be financial advice. All of the material is correct as of the publication date, but could be out-of-date by the time you read the article.

If you are self-employed, filling in your self-assessment form at the end of the tax year can be a complicated and laborious task. It may seem difficult to understand why some financial systems need to be recorded – as they seem to have little bearing on work finances.  

In this article we will look at why it’s important to include detailed information about your pension contributions, how this may affect your overall tax relief (getting something back for a change!) and help you keep on track for retirement.

Maximising tax relief from pension contributions

Filling the self-assessment form at the end of the year can be a depressing task for business owners. It has to be done but the mindset is usually one of damage limitation rather than now I can see a bit more money coming back. The overall objective in most cases is to ensure you pay the taxman only what you need to pay. So what about tax relief? Are you due money through your pension contributions that you have not been paid yet?

When to include pension contributions information

If you look at the traditional self-assessment form you will find you do not need to go into pension contributions in any great detail. This is because, unless you are a high earner, your pension contributions are not going to make a great deal of difference to your final calculations. If you are self-employed, pay into a private pension and earn below £50,270 per annum (tax relief of 20%)* you do not have to include pension contributions. In these circumstances, your pension provider will claim tax relief on your behalf at the basic rate tax and automatically add it to your pension pot.

Mother and young daughter holding piggy bank | pension contributions

Also, we are only talking about the self-employed here. If you are employed and pay into an occupational pension, you will receive relief at source. (If you are employed and you are uncertain whether you are benefiting from tax relief – find out from your pension provider).

High earners and pension contributions

So, if you are self-employed and a high earner (earning over £50,270 per annum*), then it is definitely going to be worth recording your pension contributions in order to claim the extra tax relief. Higher earners receive tax relief at 40 – 45%. If you do not claim manually on your self-assessment form,  it will go unclaimed. And this means that you will be missing out on the extra funds going into your pension.

Claiming on the self-assessment form

The area on the form SA100 where you enter your pension contributions is the section which deals with benefits, dividends and charitable donations. As may be expected you will need the section entitled tax reliefs.

When entering your pension contributions, you will need to enter the total gross amount for the whole year. This is because you are only allowed to contribute a set amount. This is called the Money Purchase Annual Allowance (MPAA) and in 2023 to 2024 it is £60,000. Going over this figure means you will pay a charge. If you are unsure of your yearly contributions, it’s always a good idea to get in contact with your pension provider to confirm the amount. Also make sure the figure you’re adding is gross and not net. The gross figure will include the basic 20% tax relief.

Tax treatment depends on your individual circumstances and may be subject to change. 

This is how the questions will look on the self-assessment form:

Example of self-assessment tax relief form

Can I claim for previous years?

If this is all new to you and there are previous years when you believe you may have earned over £50,270*, then you can claim for those years as well.

The refund you receive will either be in the form of a different tax code for the year, paying less tax for the current year, or a tax rebate.

Tax relief and benefits

If you are earning over £50,270 and you are claiming child benefit, you can claim for tax relief. For those earning over £60,000, the tax relief will be equal to the child benefit received. Those claiming child benefit will also receive NI credits towards their state pension (for this reason it is a good idea to register for child benefit – if you meet the criteria – even if you do not wish to receive it).

Conclusion

The economic crisis and rising inflation is threatening everyone’s lifestyles and financial functioning in the UK. There is an obvious tendency for people to budget for the here and now and sacrifice the future (such as pensions and retirement). But it is clear that there is still benefits to be had from wise use of finances which are preparing for the future.

At the same time this tax relief is something you can be claiming for whatever the inflation rate – so don’t miss out.

Getting the right information may mean approaching your pension provider or getting further advice from a regulated financial adviser. This extra amount that is due to you can help you budget for the here and now and still allow you to prepare appropriately for a fantastic retirement.

*This is based on English tax brackets. Scottish tax brackets will vary.

https://www.gov.uk/guidance/self-assessment-claim-tax-relief-on-pension-contributions

https://www.gov.uk/tax-on-your-private-pension/pension-tax-relief

https://www.which.co.uk/money/pensions-and-retirement/personal-pensions/contributing-to-a-private-pension-explained/pensions-lifetime-allowance-explained-and-how-to-protect-it-a1fsq7p8r39p#headline_1

https://www.which.co.uk/money/tax/income-tax/tax-rates-and-allowances/tax-reliefs-axn3v4j8dnwf

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