If you’re earning £50,000 a year or more, and you’re part of an employer NEST pension scheme or other ‘relief at source’ arrangement, you could be missing out on significant tax reliefs.
With the introduction of auto-enrolment in 2012, many employers use the government’s Nest workplace pension scheme to manage employee pension contributions. Nest is a ‘relief at source’ workplace pension scheme, where pension contributions are taken from pay after tax and National Insurance has been deducted. A 20% top up is then reclaimed from HMRC.
However, issues can arise for higher rate (40%) and additional rate (45%) taxpayers where tax codes have not been adjusted accordingly, and employees end up paying too much tax. The good news is that if some tax relief has been missed you can claim back up to four years’ worth by making an overpayment relief claim with HMRC.
This can also result in some higher rate taxpayers having to repay Child Benefit unnecessarily (particularly where earnings are over £50k). This becomes more significant if you earn over £100k, as we would then deal with restrictions in eligibility for tax-free childcare.
If you are a higher rate taxpayer and are part of a Nest workplace pension scheme, we recommend that you check your own tax code, or contact HMRC or an accountant to see whether the correct adjustments have been made, and claim any overpaid tax back from HMRC. This link will provide further information.
Reclaim tax relief for pension scheme members with relief at source - GOV.UK (www.gov.uk)
If you are unsure whether you are impacted by the above, please get in touch with your usual Moore adviser who will be happy to help.