HMRC Crackdown on Higher Rate Pension Tax Relief – What You Need to Know

Pensions remain one of the most tax-efficient ways to save for retirement, particularly for higher and additional rate taxpayers. By contributing into a registered pension scheme, individuals can receive valuable tax relief that boosts the overall value of their savings.

But recent developments show HMRC is increasing its scrutiny of higher rate relief claims. Errors are more common than many realise, and HMRC believes too much relief has been claimed incorrectly in self-assessment returns.

With this in mind, Graham Doubtfire our Private Client Tax Partner, looks at why it’s so important to regularly review your pension contributions carefully.

How pension tax relief works

For most savers, tax relief on pension contributions is provided automatically. If you’re in a ‘net pay’ scheme, your contributions are deducted before tax is calculated, so you get your full tax relief upfront.

If you’re in a ‘relief at source’ scheme, contributions are taken after tax, and the provider claims basic rate relief (20%) directly from HMRC on your behalf. Higher and additional rate taxpayers can then claim extra relief through their self-assessment tax return.

This extra relief can be significant. For example, a £10,000 gross contribution costs a higher rate taxpayer just £6,000 once full relief is factored in. So, it’s easy to see why HMRC is paying closer attention.

Common pension relief mistakes

There are several common areas where errors – and ultimately HMRC challenges – tend to occur:

• Double claims – some taxpayers may end up claiming higher rate relief on contributions made through net pay schemes, where full relief has already been given at source.
• Income thresholds – if income falls below the higher rate band in a given year, additional relief may not be due, but claims are sometimes still made.
• Misreporting – contributions could be entered incorrectly in self-assessment, leading to inflated relief claims.
• Director contributions – for owner-managed businesses, confusion can arise where the company has already made contributions on behalf of a director. Personal relief can’t then be claimed again on top.

A tougher stance from HMRC

HMRC has made it clear that they’re stepping up reviews of pension relief claims. From 1 September 2025, they’ve lowered the threshold for requiring evidence to support new requests meaning some individuals may be asked to provide evidence where they wouldn’t have done so before. And it will no longer be possible to make a claim over the phone.

Taxpayers who then incorrectly claim extra relief could face:

• Tax repayments to claw back relief if it was not due.
• Interest charges to cover the time of any incorrect claims.
• Penalties if HMRC believes the error was careless or deliberate.

In some cases, enquiries into pension relief can also act as a gateway to wider investigations into an individual’s tax affairs. So, the message is clear: HMRC is treating this as an area of growing risk.

What can you do now?

For anyone making pension contributions, it’s worth checking how your scheme works and whether your claims are correct. Actions you can take include:

• Confirming how relief is applied- you can ask your pension provider whether your scheme is net pay or relief at source.
• Check your contributions against your income levels to make sure you’re entitled to higher or additional rate relief in the year in question.
• Keep any supporting evidence. So, any pension contribution certificates, payslips or provider statements will all help if HMRC raises questions.
• Review your self-assessment return, make sure your entries relating to pensions are accurate and consistent with the scheme you’re on.

Professional support really adds value here as we’ll review your pension contributions each year as part of the tax return process. In doing so we’ll then be able to identify where there might be a risk of an incorrect claim. We can also advise whether your contributions should be made personally or via your company to achieve the best tax outcome.

And we’ll make sure you’re compliant with HMRC requirements while still maximising the relief available.

This recent HMRC focus certainly shouldn’t deter you from saving into pensions. The tax reliefs available remain generous, and for higher and additional rate taxpayers, they can be especially valuable.

The key point is to make sure that the relief you’re claiming is done so correctly.

We’re here to help

Now is as good a time as any to review your position. So, if you’re unsure whether your past or current claims are correct, we’ll help you check – giving you peace of mind that your retirement savings are working as hard as possible.

Contact Graham or one of the team on 0330 058 6559 or email hello@scruttonbland.co.uk