Taxman steps up pension tax relief scrutiny
HM Revenue and Customs is cracking down on pension tax relief as part of a broader drive to maximise revenue collection, according to reports.
The tax authority is said to be stepping up its scrutiny of claims from higher earners and “lowering the threshold” for requiring evidence to support requests.
Additionally, HMRC will no longer accept claims by telephone. Instead, taxpayers are being instructed to submit claims online or by mail.
And the media reports say that individuals will also be “asked to provide evidence where it would not previously have been required”.
Under the present system, taxpayers can save a maximum of £60,000 a year into their pension and benefit from tax relief.
Basic-rate taxpayers automatically get 20 per cent relief added to their pot, while higher earners paying 40 per cent or 45 per cent tax may need to claim the extra tax relief through their self-assessment tax return.
HMRC said the changes were being made to “protect taxpayers’ money” after an internal review found some workers were making incorrect claims for pension tax relief.
It has been reported that a review of claims for up to £10,000 in relief discovered that almost a third were for incorrect amounts.
The most common mistakes were claiming without higher-rate taxpayer status, seeking relief under a “net pay” arrangement where it had already been granted and providing estimated rather than precise contribution figures.
About 80,000 claims for Personal Pension Relief are submitted to HMRC every year.
A spokesperson for HMRC told the Daily Telegraph newspaper: “We’re lowering the threshold to ensure that people claim the right amount of relief and protect taxpayers’ money.
“This comes after we conducted a review which revealed that many claims below the current evidence threshold were incorrect.”
Chancellor Rachel Reeves is reportedly considering reducing the amount of money pensioners can withdraw from their savings pot without paying tax to as little as £40,000 in her Budget in November.
If it happens, it is a move that would be expected to raise more than £2billion for the Treasury.
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