Tell HMRC about pension contributions for the last tax year & year-end tax planning tipsIf
If you are taxed under PAYE (employed) and that is your only income, it is unlikely that HMRC requires you to complete a tax return.
While that is good news, if you are a higher-rate taxpayer making pension contributions to your own pension, you should inform HMRC about those pension contributions to receive higher-rate income tax relief. In other words, for every £80 net you have contributed, your tax bill will be reduced by at least £20.
If you want to receive the higher-rate relief quickly, we recommend submitting an online tax return. Otherwise, simply write to HMRC quoting your National Insurance Number, detailing the gross contributions paid. It will help to enclose a Contribution Certificate from your pension provider.
Other things that you may consider as part of your tax planning as 5th April approaches are;
Additional Pension contributions If you are likely to be a higher rate taxpayer in the current tax year, and especially if your income will be between £100,000 and £125,140, consider making additional contributions while higher rate relief remains available. Many commentators expect higher rate relief to be abolished and replaced with a flat rate for everyone at some stage.
Capital gains tax. The relative tax treatment of capital gains and income has been highlighted by several parties during the election campaign. The current regime, with an annual exemption of £12,300 and a maximum tax rate of just 20% (other than for residential property and carried interest), is generous. If you have not yet used your 2021/22 annual exemption, doing so sooner rather than later seems a sensible course of action.
ISAs A few years ago, there was talk of capping ISA contributions. With ISAs now costing over £3bn in lost income tax according to the latest HMRC figures, such Treasury brainstorming could reappear. Again, if you have not topped up your 2020/21 contributions, now is the time to act.
VCTs & EiS. For higher earners prepared to accept additional risk, these can be very useful, although advice is essential for these complex products.
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