If you are employed and receive a wage or salary you might be able to claim tax back on your pension contributions.
The Scottish government have set the tax rate at 21% for the Intermediate Rate, 41% for the Higher Rate and 46% for the Additional Rate. Basically, if you earned above £25,158 between 6 April 2020 and 5 April 2021, you are due a tax refund!
Most pension providers operate a scheme called Relief at Source, PensionBee, Nest and The People’s Pension all operate this Relief at Source scheme. As the basic rate is 20%, when you make a £100 contribution into your pension you only need to pay £80 into the pension scheme. The scheme administrator (PensionBee, Nest, The People’s Pension amongst others) reclaims £20 from HMRC and puts this into the scheme making up the pension contribution to £100.
The issue with Scottish taxpayers, is you actually pay 21%, 41% or 46% tax. So while your pension reclaims 20%, you’re missing out on 1%, 21% or 26%.
You earn £60,000 in the 2020 to 2021 tax year and pay 21% on £18,272 and 41% tax on £16,570. You put £15,000 into a private pension. You automatically get tax relief at source on the full £15,000.
With the whole pension contribution fitting into the Higher Rate tax band, a tax refund of 21% can be applied for. Why 21%? Under the Scottish tax bands, the Higher Rate is 41%, your pension provider automatically claims 20%, leaving 21% going unclaimed. We can hep you submit a claim for this remaining 21% of the £15,000 pension contribution, or…
A tax refund of £3,150.00!
To sum up, if you’ve earned above £25,296, you might be due a tax refund. You can use the below calculator to estimate what that refund could be.
If you would Self Assessment Scotland to support you in claiming your tax refund, get started today by completing our online form.