Millions of households across the United Kingdom have received a stark warning that they are inadvertently paying more tax to HM Revenue and Customs than legally required. This widespread issue stems primarily from a failure to claim appropriate tax relief on pension contributions, potentially leaving substantial sums of money unclaimed.
The Pension Tax Relief Gap
According to pension provider Penfold, a significant number of individuals mistakenly assume that pension tax relief is applied automatically by HMRC. This misconception is particularly prevalent among higher-rate taxpayers, who may be missing out on considerable financial benefits.
Chris Eastwood, Chief Executive of Penfold, emphasised the scale of the problem: "We regularly encounter people paying higher-rate tax who assume all their pension tax relief is handled automatically. In numerous cases, this is not true, resulting in money being left on the table that HMRC will not refund unless specifically claimed."
Substantial Financial Implications
The financial impact of unclaimed relief can be substantial. Mr Eastwood provided a clear example: "For an individual paying 40% income tax, a £10,000 pension contribution could effectively cost as little as £6,000 once all eligible tax relief is properly claimed." This demonstrates how failing to claim relief can significantly increase the real cost of pension saving.
Critical Deadline Approaching
With the self-assessment deadline of January 31 rapidly approaching, financial experts are urging taxpayers to review their pension contributions urgently. This period represents a crucial window to ensure that all entitled tax relief has been correctly claimed for the previous tax year.
Mr Eastwood stressed the importance of this review: "January represents a vital moment to examine contributions made during the tax year and verify that any higher-rate relief has been appropriately claimed. Claiming pension tax relief is not about exploiting the system; it is about ensuring people receive the tax benefit that Parliament intended—and avoiding payment of unnecessary tax."
HMRC's Digital Services
HMRC has reported growing adoption of its digital tools, with more than seven million people using their online services as of 2025, an increase from five million the previous year. Myrtle Lloyd, HMRC's Chief Customer Officer, commented: "The Self Assessment deadline is less than one month away, and thousands have already settled their tax bills via the HMRC application. The process is quick and straightforward, and users can also access their payment history. Search 'download the HMRC app' on GOV.UK to obtain the application and complete your Self Assessment payment."
This warning comes as households nationwide face continued financial pressures, making efficient tax management increasingly important. Experts recommend that all taxpayers, particularly those making pension contributions, carefully review their positions before the January deadline to ensure they are not overpaying HMRC unnecessarily.
