Over 1,000 (1,004) people failed to report that a pension tax charge had been paid by their scheme on their behalf on their tax return in 2016/17, a freedom of information (FOI) reply obtained by Royal London has revealed.

In November 2019, HMRC stated that it knows that “scheme members are forgetting to declare details of their annual allowance charge on their self-assessment returns”, and urged schemes to remind members of the requirement to declare this information.

However, the FOI has revealed that 1,004 people failed to report this information on their return in 2016/17, the most recent year figures are available for.

Royal London has emphasised that while the latest figures suggested the amount contributed in excess of the annual allowance (AA) had increased eight-fold over the last five years, there was likely still “significant” under-reporting.

The firm also highlighted that the number of people affected by ‘scheme pays’ has grown “rapidly” since 2016/17, arguing that it is likely that “thousands” of people are now failing to report this same information.

This follows a FOI from Quilter, which found that 84,048 NHS pension scheme members had exceeded their annual allowance between 2013/14 and 2017/18, while a further survey from First Actuarial found that 56 per cent of NHS workers expected to be affected by a breach in the future.

The research cited a number of complications that can lead tax payers to file inaccurate information, such as knowing what their AA is, whether they are affected by the money purchase or tapered AA, and whether they are able to ‘carry forward’ unused AA from previous years.

The FOI from HMRC also clarified that this is a case of “under-reporting, not under-payment”, but emphasised that taxpayers are expected to give complete information on their tax return.

Royal London director of policy, Steve Webb, commented: “‘Filling in your tax return can be challenging enough, but the complexity of the rules around pension tax relief for higher earners is a particular nightmare.

“The good news is that some higher earners can claim additional tax relief provided that they put the right information on their tax return. But others need to make sure they report contributions in excess of their annual allowance and pay the tax due now.

“However, the complexity of the tax relief system means that this can often be a real challenge, even for taxpayers who are doing their best to be honest and open about their tax affairs’.

This follows NHS England’s confirmation of emergency interim plans, which will allow pension tax bills incurred by doctors to be paid through the ‘scheme pays’ option, though these have also raised further concerns around tax avoidance.

Share Story: