Martin Lewis has urged people to check their tax details after sharing a pension success story, warning that millions of people have the wrong details in place. The warning follows a pension saver claiming almost £3,000 back from HMRC.
A person called into his BBC podcast to share how they had done an “easy” check on the Government website and claimed money back from the taxman. The Martin Lewis fan said they had heard him speak on his podcast about how those on the higher rate for income tax have to claim back the extra tax relief on their pension contributions from HMRC.
‘Easy’ online check
When you pay into your pension, the pension provider claims the basic 20 per cent relief on your contribution. But if you are on the higher or additional rate for income tax, you need to claim the extra 20 per cent or 25 per cent relief yourself.
The person said the process was “so easy” to claim the extra amount from HMRC online: “It took me about 40 minutes to submit claim forms for the four years that were still claimable, and then the calculations started coming through.”
They discovered that they actually owed £509 in tax for one year, but even with that accounted for, they claimed a £2,853.47 refund from HMRC. The pension saver said they were amazed to find this amount of tax relief was sitting there unclaimed.
They said they work as a director in the NHS and are used to working with large budgets, yet in their personal finances they had overlooked this for years. Mr Lewis was impressed by the story, saying: “It’s wonderful, and thank you for your evangelism.”
The consumer expert expressed his sympathy that we can all overlook things like this: “The truth is, we can all get caught by something. I can get caught by stuff as well.”
Millions have the wrong details
As the caller said that when claiming back the amount, they had also discovered they had underpaid tax previously, Mr Lewis picked up on this point. He said: “Millions of people have the wrong tax code. The tax code is what tells your employer how much tax to take when you're on PAYE, and you have to check that one, too.
“And there are millions of errors in those, and that is the individual's responsibility, not the employer's, not HMRC's.” If you are on the wrong tax code, you could end up paying too much or too little tax, so it's important to have the right one in place.
You can find your current tax code on a recent payslip. You can also find it through the HMRC app or using the Government website.
Another pensions boost?
Another way you could potentially boost your retirement income is by buying National Insurance (NI) contributions. These are important as they build up your state pension entitlement, with the full new state pension currently paying £241.30 a week.
You typically need 35 years of NI contributions to get the full new state pension. The gov.uk website has a tool to check your NI record, to see if you have any gaps.
As well as knowing how much state pension you are on track to get, it's important to know when you'll be able to claim it. There is a change to the rules underway here.
The age you can claim your state pension is currently increasing, moving up in stages from 66 to 67, between April 2026 to April 2028. Legislation is also in place for it to increase from 67 to 68, between April 2044 and April 2046, but there has been a lot of debate about accelerating this timetable.
