People with pensions can escape tax bill thanks to 'backdate' tactic

UK pension holders can backdate tax relief to avoid bills, they have been told. Pension savers can backdate pension contributions for up to the last four tax years so that means any pension contributions made from the 2019/20 tax year.

Claiming tax relief on pension contributions for previous years works in the same way as claiming for this tax year but pension savers are warned to bear in mind you’ll only be able to claim for years in which you were a higher earner (earned over £50,270).

Every taxpayer gets basic rate income tax relief applied to their personal pension contributions up to the annual pension allowance of £60,000 (or 100% of your total earnings). Higher-rate taxpayers are eligible to claim an extra 20% tax relief on their contributions.

READ MORE UK tourists in Tenerife warned to pay £340 or face 'sleeping in a tent'

This means 40% tax relief to match the 40% tax they pay on earnings above the higher rate income tax threshold. The UK government website explains: "An annual allowance limits the amount someone can pay into pension schemes each year before they must pay tax. It is £60,000 in 2024/25.

"A person cannot usually receive tax relief on pension contributions worth more than 100 per cent of their annual earnings However, people can still contribute £3,600 a year into a pension with tax relief even if they earn less than this.

"You’ll get a statement from your pension provider telling you if you go above the annual allowance in their scheme. If you’re in more than one pension scheme, ask each pension provider for statements. You might be able to carry over any annual allowance you did not use from the previous 3 tax years."

Helpfully, tax relief means a 25 per cent basic rate tax up from HMRC on anything you put into your pension means every £1,000 you contribute becomes £1,250.