Have You Declared Pension Growth On Your Tax Return?
You could get a huge tax bill if you haven't ...
POSTED BY HELEN BEAUMONT ON 11/12/2019 @ 8:00AM
If you're a high-earner, you could be hit with a huge tax bill for failing to report any pension growth on your self-assessment tax return ...
Have you declared pension growth on your self-assessment tax return?
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You may have noticed questions about pension contributions on your self-assessment form. Anything above your annual allowance needs declaring, including growth in Defined Benefit (DB) and cash paid into Defined Contribution (DC) pensions.
"You must pay tax on this at your marginal income tax rate of either 40% or 45% depending on your income!"
HMRC recently confirmed that many taxpayers have left the answer to this question blank on their return. This potentially means that thousands of individuals could have failed to declare large pension inputs and will face large bills when HMRC finally catches up with them.
In a recent communication to pension schemes, HMRC wrote, "scheme members are forgetting to declare details of their annual allowance charge on self-assessment returns".
It's worth noting that pension schemes only need to notify members if they have passed the £40,000 annual allowance limit. Some people have a much lower annual allowance, however, they may not be aware that the rules are so complicated.
Tapered annual allowance rules mean that £1 or annual allowance is lost for every £2 of income above £150,000 a year. Once income exceeds £210,000 the annual allowance bottoms out at £10,000.
Director of policy at Royal London, Steve Webb, 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."
If you're at all worried that you failed to declare this information on your self-assessment tax return, then I strongly advise you seek professional tax advice before HMRC present you with a huge bill.
Until next time ...
About Helen Beaumont ...
Helen brings the personal tax planning experience of the top 20 tax companies to Essendon. Formerly of MacIntyre Hudson (with 45 offices nationwide), Helen worked at Chancery for more than 10 years before joining Essendon as the personal tax specialist.
Tax Planning can make a considerable difference to your tax liability. Helen has specialist knowledge and experience in tax planning and uses every opportunity to minimise your tax bill is utilised. By analysing your investments, income, profit and expenditures, Helen will provide strategic tax planning expertise that could offer significant savings, whilst delivering clear, honest advice and guidance.
When Helen is not at Essendon she spends time with her young son and likes going on long walks with the family dog.
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