HMRC Cracks Down on Higher Rate Pension Relief Claims

A third of claims for personal pension relief by higher rate taxpayers are incorrect with numerous ineligible claims, mistaken calculations and some not even knowing how much they paid into their pension.

HMRC is tightening up checks to ensure personal pension relief claims are legitimate after a spot check found ‘many claims below the current evidence threshold were incorrect’. In future, all claimants will have to provide evidence of their claims.

HMRC will no longer accept claims over the phone and going forward individuals will have to submit claims online or by letter only unless the have you as their tax adviser. 

From 1 September 2025, HMRC will lower the threshold for requiring evidence in support of new requests for higher rate or additional rate relief claims to be given through an individual’s tax code for the current year.

‘As a result, some individuals may be asked to provide evidence where it would not previously have been required,’

HMRC said that most taxpayers they wrote to did not respond with evidence, while of those who did, around one third needed to correct the amount claimed.

Typical mistakes include claiming for personal pension relief when taxpayer is not higher rate and pays income tax at the 20% base rate, where relief is automatically applied through PAYE through relief at source.

In other instances, a claim is made when the pension is under a net pay arrangement so relief has been obtained. Under net pay, the pension contribution is removed from salary by the employer before income tax, but after National Insurance contributions are deducted. 

Some taxpayers guess the amount they pay instead of getting actual figures from the pension provider or employer.

There also appears to be confusion with how to make the calculation for relief, with taxpayers grossing up incorrectly or providing the gross pension contributions as the net payment in error.

Currently taxpayers need to upload or send proof from their pension provider of payments made for each tax year they are claiming for, where any of the following apply: Payments are more than £10,001; a lump sum was paid into the pension; or if a basic rate taxpayer and no tax relief has been claimed at source. 

The solution is for you, the agent, to make the claim.