Hello! I have a problem regarding tax reliefs on pension contributions. I am confused and cannot figure how to calculate tax relief on pension contribution. I think that I've been charged too much tax and I don't think that I'm receiving enough tax relief on my pension. Could you explain me how these tax reliefs' works? What could happen if I don't pay my tax on pension contribution?
The governments in every country are encouraging people to save for their retirement days by giving them tax reliefs on pension contributions. These tax reliefs are reducing their tax bills or increasing their pension funds. Calculating tax relief on pension contributions depends on whether you pay into a personal or company pension scheme. When it is about personal pension scheme the rule is that your employer takes the pension contributions from your pay before deducting tax and you only pay tax on what's left. If you are a higher rate payer you will get full relief immediately. As far as personal pension scheme concerns, your pension provider is claiming tax back from the government. If you are higher rate tax payer you are able to claim the difference through self assessment or you can claim by sending letter to your tax office. Of course, there are limits on how much tax relief you can get. Everyone can make pension contributions whether they are paying tax or no. The only difference is that if you don't pay tax there is a limit on the amount of money you can contribute to your pension scheme.
