Thousands of retirement savers face financial penalties because they are claiming too much tax relief on the money they pay into pensions.
HM Revenue and Customs (HMRC) will claw back any overpaid tax relief when the tax year ends on April 5.
More than 7,000 retirement savers had to repay savings put into their pensions as contribution top-ups in 2014-15 when the limit was £40,000.
This was an almost 80% over the year before when the limit was £50,000, when 3,900 confessed that they had claimed too much tax relief.
The following year, 5,800 pension savers claimed too much.
Pension relief squeezed every year
“Those who breach the limit will face a tax charge to claw back any tax relief they have received on contributions above the allowance,” said an HMRC spokesman.
HMRC expects this year’s tally of over claimers to rise again as the allowance has dropped to just £10,000 for high-earners with annual incomes of more than £150,000.
Royal London policy director Steve Webb said: “Pension tax relief has been squeezed year after year, and these new figures reveal a big growth in the numbers paying a tax penalty for being over the annual allowance limit.
“With a big cut in annual allowances for high earners in last year, many more people risk breaching the limit unless they cut back on their contributions or use up unused allowances from earlier years.”
Tax window soon to close
Webb explained that a tax window is open until April 5 that allows pension savers to claim unused allowances from as far back as 2013-14, when the annual allowance was £50,000 a year.
High earners need to calculate their available allowances and pay the money into their pensions by the end of the tax year to boost their pots.
When the tax year turns over at midnight on April 5, any unused allowances from 2013-14 are lost forever.
“Savers have just a few weeks to use up spare allowances from 2013/14. It is worth anyone in this position finding out urgently how much they have spare from earlier years and to take impartial advice to help them plan the right level of pension contributions before the end of this tax year,” aid Webb.
