HMRC tells Scottish savers to notify taxman to get extra 1% tax relief

The Scottish Government confirmed that the five new income tax bands will come into effect for the 2018/19 financial year in a move that will complicate the process of calculating pension saver’s contributions.

Currently, pension savers in Scotland receive pension tax relief at their marginal rate, however, the note from HMRC cast light on relief at source schemes where tax relief is applied to contributions after members have paid income tax.

This is different from schemes that calculate on a net-pay basis, which means pension contributions are deducted before income tax is applied to a member’s pay.

The guidance explains that savers who are starter rate tax payers and earn £11,850 to £13,850 will automatically receive 20 per cent tax relief.

The same goes for basic rate tax payers who earn £13,850 to £24,000.

However intermediate rate tax payers who earn £24,000 to £43,430 will need to tell HMRC about their tax bracket in order to get the extra 1 per cent of tax relief and the full 21 per cent they are entitled to.

According to the Scottish Government 874,000 people fall into the intermediate tax band.