6 questions for pension savers filing their 2022-23 tax return

A third of higher-rate taxpayers could be missing out on tax relief on their pension contributions by not completing a self-assessment tax return, according to a poll by Interactive Investor. 

The tax relief you get automatically depends on what type of pension scheme you're paying into, and you may have to do extra legwork to claim the missing amount.

But there are other reasons you may need to file a self-assessment tax return. In November 2023, we surveyed 508 people who will be filing a self-assessment tax return for the 2022-23 tax year and found that one in 10 needed to do one because they had pension contributions exceeding their annual pension saving allowance.

With the deadline looming to file online, you may want to file sooner rather than later. Here, we set out six questions, that both higher and basic-rate taxpayers who are saving into a pension, need to ask themselves before completing their 2022-23 self-assessment tax return. 

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1. How much pension tax relief should you get?

How much tax relief you get depends on how much income tax you pay in 2022-23: 

• Basic-rate taxpayers get 20% pension tax relief (meaning a £100 contribution would cost £80). You pay the basic rate of tax on earnings between £12,570 and £50,270. 
• Higher-rate taxpayers can claim 40% tax relief (a £100 contribution would cost £60). You pay the higher rate of tax on earnings between £50,271 and £150,000.
• Additional-rate taxpayers can claim 45% pension tax relief (a £100 contribution would cost £55). You pay the additional rate of income on earnings over £150,000.

Income taxes in Scotland are different. Find out more in our guide to #UK in.

• Find out more: pension tax relief calculator.

2. What type of pension do you have?

The way tax relief is claimed depends on the type of pension you're saving into, and it's worth checking with your scheme to see what method it uses.

Net pay Pension contributions are deducted from your salary before income tax is paid on them. Your pension scheme automatically claims back tax relief at your highest rate of income tax. This means you'll get the full tax relief you're entitled to without having to claim it yourself.

Relief at source This applies to all personal pensions and some workplace pensions. Pension contributions are paid after you've paid income tax. Your pension scheme will send a request to HMRC, which will pay 20% tax relief into your pension. This means higher and additional-rate taxpayers will need to submit a self-assessment tax return to claim the extra tax relief they're entitled to, or contact HMRC directly.

For example, if you earned £60,000 in the 2022-23 tax year and put £15,000 into a private pension, you’d automatically get 20% tax relief at source on the full £15,000. You can claim an extra 20% tax relief on £9,730 (this is the amount of income you paid higher-rate tax on) through your self-assessment tax return. 

If you’re unsure, it’s worth checking with your pension scheme to find out what method it uses.

According to Interactive Investor's snap poll, a third of higher-rate taxpayers who made contributions to a self-invested personal pension (Sipp) or private pension in the 2022-23 tax year, could miss out on tax relief as they don't plan on claiming it through their tax return. Two thirds, however, do intend to claim it. 

3. Have you exceeded your annual allowance?

The government puts a limit on the amount of pension contributions you can earn tax relief on. This is called the pensions annual allowance and it's set at 100% of your income or £40,0000 for the 2022-23 tax year – whichever is lower.

This means that any pension contributions you make over the limit will be subject to income tax at the highest rate you pay. 

However, you can carry forward unused allowances from the previous three years, as long as you were a member of a pension scheme during those years.

If you exceed the annual allowance in a year, you won't receive tax relief on any contributions you paid that exceed the limit, and you will be faced with an annual allowance charge.

This charge is added to the rest of your taxable income for the year to work out your overall tax liability. You'll need to fill out a self-assessment tax return to detail how much of your pension contributions exceed the annual allowance and work out how much is due.

According to government data, in the 2021-22 tax year, 53,330 individuals reported pension contributions exceeding their annual alliance through tax returns. The total value of contributions reported as exceeding the annual allowance was £1.2bn, which is an increase from £764m in 2020-21. 

• Find out more:how the pensions annual allowance works .

4. Do you have a reduced annual allowance?

If you have a high income, you might have a reduced annual allowance. 

This will be the case if your adjusted income is above £240,000. Adjusted income is made up of your salary, dividends, rental income, savings interest and any other income you receive. 

This means that for every £2 of income over £240,000, your annual allowance is reduced by £1.

The maximum reduction is £36,000; anyone with an income of £312,000 or more has an annual allowance of £4,000.

You could also have a lower annual allowance if you have already begun to draw your pension. This will reduce your annual allowance to £4,000. This is called the money purchase annual allowance, or MPAA, and applies to people who have taken money from a money purchase or a defined contribution pension.

• Find out more:how to get retirement and pension advice.

5. Will your pension scheme pay the charges?

If your pension contributions have exceeded your annual allowance, you might be able to ask your pension scheme to pay any tax charge on contributions above the annual allowance directly to HMRC. This arrangement is known as 'scheme pays'.

The charge is then taken out of your pension pot, meaning you don't have to fund it by other means.

However, you still need to disclose the annual allowance charge on your tax return or risk being penalised.

All registered pension schemes must offer a scheme pays facility, but you must meet the following criteria to use it:

• Your pension savings with that scheme are more than the annual allowance of £40,000 (the MPAA and tapered annual allowance are ignored for this purpose)
• Your tax charge is more than £2,000 for that year
• You've notified your scheme by the deadline of 31 July in the year following the end of the tax year in question.

There is government guidance on what to fill in your self-assessment tax return box.

Find out more: what is a personal pension? 

6. Can you backdate any claims?

If you forgot to claim tax relief for a previous tax year, you can do so up to four years after the end of the tax year you're claiming for.

To make a claim, you'll need to write to HMRC.

Get more self-assessment tips

If you're filing your first self-assessment tax return, or want to refresh your memory on what you need to do, Which? has plenty of helpful information to make the process easier.

See our guide on how to fill in your tax return and what happens if you're late filing your tax return and paying your bill.

File your 2022-2023 tax return with Which?

If you haven't yet submitted your 2022-23 tax return, the Which? tax calculator could help.

Our online tool is easy to use, jargon-free and helps you tot up your tax bill. What's more, it will even suggest areas where you could be able to claim expenses that you might have forgotten about.

When you're finished, you can use the tool to submit your tax return directly to HMRC.