HMRC says 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.
It will also no longer be possible to make a claim over the phone.
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.
HMRC said around 80,000 personal pension relief claims are received annually and the total cost of was £29.5bn in the 2024/2525 tax year, obvious low hanging fruit for HMRC to attack.
This issue came to light after HMRC conducted a review to understand the level of risk in the sub £10,000 personal pension relief claims.
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.
HMRC will no longer accept claims over the phone and going forward individuals will have to submit claims online or by letter only.
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.
HMRC has also made it easier to claim using an online form with the ability to upload evidence.
Gov.uk guidance, Claim tax relief on your private pension payments
Peter Nichols
BFN Accounts & Tax