Pensions - Articles - HMRC warns high earners who fail to report pensions growth


When completing annual tax returns, taxpayers are asked if they have put money into a pension above the ‘annual allowance’ – currently £40,000 per year for most people, but as little as £10,000 for those affected by the ‘tapered annual allowance’. This would include growth in their Defined Benefit pension rights as well as cash paid in to Defined Contribution pots. But this requires taxpayers to understand the rules and put the correct data on their tax return.

 There has long been a suspicion that individuals who do not understand the system have been leaving a blank in answer to this question.

 Shockingly, HMRC has confirmed in its monthly ‘pension schemes newsletter’ that they “know that scheme members are forgetting to declare details of their annual allowance charge on their their Self Assessment returns”.

 This admission means that potentially thousands of people may have failed to declare large pension inputs on their tax return and could face a large bill when HMRC finally catches up with them. Any pension input above the annual allowance is charged at an individual’s marginal income tax rate which could be 40% or 45%.

 HMRC are asking pension schemes to remind members of their duty to put this information on their tax return.

 However, pension schemes will only notify members if they have breached the £40,000 annual allowance limit. If an individual is caught in the ‘tapered annual allowance’ and perhaps has an annual allowance between £40,000 and £10,000, the scheme may not be aware of this and may not notify the member. If the member is unaware of the rules around the tapered annual allowance then they may simply enter a ‘zero’ for this question on their tax return. But this could be incorrect and they could later on find themselves with a large tax bill.

 Commenting, Steve Webb, Director of Policy at Royal London said: “The shocking saga around the annual allowance for pension tax relief gets worse. We now have HMRC admitting that they know that people are forgetting to put information about their pension tax bills on their annual return. But filling in this tax return question requires individuals to understand the system, especially if they are affected by the tapered annual allowance. Thousands of people could be set to face huge tax bills because they have innocently failed to declare this information on their tax return. HMRC needs to get to the bottom of how many people have failed to declare this information and contact them immediately. And the next government needs to radically simplify the tax relief limits, to avoid this sort of situation happening again”.
    

Back to Index


Similar News to this Story

Pension Protection Fund issue November 2019 PPF7800 Index
This update provides the latest estimated funding position, on a section 179 (s179)basis, for the defined benefit pension schemes potentially eligible
Pursuing a DIY approach to money matters costs savers
The most common reason for people not asking for expert financial help is a self-belief in their own ability, according to a study into the demand and
BlackRock comments on the November PPF 7800 Index figures
Sion Cole, Head of UK Fiduciary Business at BlackRock, comments on the latest PPF 7800 Index figures.

Site Search

Exact   Any  

Latest Actuarial Jobs

Actuarial Login

Email
Password
 Jobseeker    Client
Reminder Logon

APA Sponsors

Actuarial Jobs & News Feeds

Jobs RSS News RSS

WikiActuary

Be the first to contribute to our definitive actuarial reference forum. Built by actuaries for actuaries.