Tax Relief not added automatically

ernie-money

I was helping a friend look at his pension and how much he will get when he retires and I saw that he hasn't had any tax relief added, although contributions have been made after tax. On both my policies that I pay into (not through employer, but separate contributions) I get 25% tax relief added automatically, so I assumed that this would be how all pension providers operate. I helped him write to his pension provider (Phoenix Life) to query this and they have replied that he might be eligible for tax relief (which he definitely should be, as contributions have been made by direct debit from his bank account since 1984) but he would have to claim this from HMRC direct. Is this common practice? We contacted the Inland Revenue, but nobody had a clue what we were talking about, saying that the only way you can claim tax relief is if you're a higher rate tax payer, and advised us to write a letter about it, which I will now help him do. 
Would anyone have any helpful information regarding what the process should be, whether it's possible to reclaim tax relief for that far back, or anything else to put in the letter..? I would be most grateful on his behalf!

zagfles

So these contributions are direct and nothing to do with his employer? Is he/was he self employed? Is this an ordinary personal pension?

xylophone

I helped him write to his pension provider (Phoenix Life) to query this and they have replied that he might be eligible for tax relief (which he definitely should be, as contributions have been made by direct debit from his bank account since 1984) but he would have to claim this from HMRC direct.

I wonder was this a S226 Contract?

https://www.moneyhelper.org.uk/en/pensions-and-retirement/pensions-basics/how-retirement-annuity-contracts-work

How are retirement annuity contracts different from personal pensions?

Some providers don’t automatically claim and add tax relief on your contributions. This means you have to submit a self-assessment tax return to HMRC to get tax relief.

Even when the provider does add tax relief – this is at the basic rate. So if you’re a higher rate taxpayer, you will need to claim the extra tax relief.

https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm044100

Tax relief on contributions into a retirement annuity contract

The member should ask the provider which method they use. If they don’t use the relief at source system (see PTM044220), the member will need to make a personal claim for relief from HMRC.

And

https://forums.moneysavingexpert.com/discussion/comment/53569329/#Comment_53569329

With regard to claiming tax relief for earlier years, I think that this may be possible for only the four tax years previous to the current one.

Only higher rate is mentioned here but I should think that it would apply to basic rate where basic rate relief has not been given?

https://www.unbiased.co.uk/life/pensions-retirement/how-to-claim-higher-rate-tax-relief-on-pension-contributions#:~:text=You can make backdated claims,of the missing tax relief.

dunstonh

 helped him write to his pension provider (Phoenix Life) to query this and they have replied that he might be eligible for tax relief (which he definitely should be, as contributions have been made by direct debit from his bank account since 1984)

Personal pensions did not exist until 1988.   So, this probably makes it a S226 Retirement Annuity Contract.   These are paid gross and the tax relief is claimed manually via self-assessment (either via the tax return or a letter to HMRC if no tax return is completed.

Is this common practice? 

For S226s yes.

HMRC will refund for past years but they will usually not go back further than 6 years.

On both my policies that I pay into (not through employer, but separate contributions) I get 25% tax relief added automatically, so I assumed that this would be how all pension providers operate.

You get 20% tax relief because you probably have a personal pension rather than a S226.

ernie-money

dunstonh said:

 helped him write to his pension provider (Phoenix Life) to query this and they have replied that he might be eligible for tax relief (which he definitely should be, as contributions have been made by direct debit from his bank account since 1984)

Personal pensions did not exist until 1988.   So, this probably makes it a S226 Retirement Annuity Contract.   These are paid gross and the tax relief is claimed manually via self-assessment (either via the tax return or a letter to HMRC if no tax return is completed.

Is this common practice? 

For S226s yes.

HMRC will refund for past years but they will usually not go back further than 6 years.

On both my policies that I pay into (not through employer, but separate contributions) I get 25% tax relief added automatically, so I assumed that this would be how all pension providers operate.

You get 20% tax relief because you probably have a personal pension rather than a S226.

Thank you so much, that makes sense. Although it seems somewhat unfair, as the inland revenue wouldn't write off unpaid tax because it’s older than 6 years…

Dazed_and_C0nfused

HMRC won't go back more than 4 years and the time limit for 2017:18 expires next week.

But I think you may have jumped to conclusions.  Just because they haven't received relief at source doesn't mean they haven't received the right amount of tax relief.

1).  Does he complete Self Assessment tax returns each year?

2).  If he is employed (or getting a pension) have you checked his tax code and how that has been calculated.

dunstonh

2).  If he is employed (or getting a pension) have you checked his tax code and how that has been calculated.

That is the most common method it is handled

ernie-money

He hasn't been self employed for many years and his tax code is 1269L, which would imply that he's got a slight additional allowance added? Not enough though, so would it be possible to get the tax code changed, to go back further than the 4 or 6 years indicated..?

Dazed_and_C0nfused

It's too late now for tax codes for 2021:22 or any earlier year to be revised.

If he hasn't completed Self Assessment returns for 2017:18 or later then he needs to write to HMRC providing the relevant details for them to review each year.

He must have got the details to HMRC by 5 April 2022 for the 2017:18 to be considered.

I would say he has 0% chance of any earlier tax years being reviewed.  

ernie-money

Dazed_and_C0nfused said:

It's too late now for tax codes for 2021:22 or any earlier year to be revised.

If he hasn't completed Self Assessment returns for 2017:18 or later then he needs to write to HMRC providing the relevant details for them to review each year.

He must have got the details to HMRC by 5 April 2022 for the 2017:18 to be considered.

I would say he has 0% chance of any earlier tax years being reviewed.  

Thank you - most helpful, although disappointing...