Do You Pay Higher Rate Tax?
A report was conducted in 2017 to see how many U.K. adults were paying higher rate tax (someone now with an income in excess of £50,000). The report concluded that broadly 14% of all tax paying adults are higher rate tax payers.
The next question is, who enjoys paying that level of tax?
If you are paying into a pension you receive something called tax relief. Tax relief is automatically added on for the first 20% (ok 25% as its grossed up e.g you or your employer pay in £80 and tax relief turns it into £100).
However if you are a higher rate tax payer and not completing a self assessment for tax you are missing out on valuable tax relief (money) which is owed to you.
Example – You earn £100,000 pa, you make a gross pension contribution to the full amount of £40,000 for the current tax year, the net figure you have actually paid in is £32,000 (£32,000 is grossed up to £40,000 through tax relief).
However there is a further £8,000 that needs to be reclaimed through your self assessment tax return.
Not to mention that this can be done for the last 4 years, in short if you’ve been paying the same level for the last 4 years you could be entitled to reclaim £32,000 in tax relief.
The tax relief in the main can be given back to you by means of either an adjustment to your PAYE coding through your employer or as a tax rebate.
If you would like to know more or feel that you are in a similar position then contact us on 01483 654135