Relief at source is a way of giving tax relief on contributions a member makes to their pension scheme.
How relief at source works
A member making a contribution to their pension scheme will get tax relief at the relevant basic rate. The amount paid to the scheme is treated as having had an amount equivalent to basic rate tax deducted.
The scheme administrator claims the basic rate tax relief from HMRC and adds it to the pension pot. This applies whether or not the member pays tax.
For example if the relevant basic rate was 20%, and a member wants to make a £100 contribution they’ll only need to pay £80 into their pension scheme. The scheme administrator reclaims £20 from HMRC and puts this into the scheme making up the pension contribution to £100.
Use the correct residency status of your members for relief at source
- the numbers of UK and Scottish rate taxpayers
- as separate amounts, how much you’re reclaiming for UK and Scottish rate taxpayers
For your scheme members who are Scottish taxpayers liable to income tax at no more than the Scottish starter rate of 19%, or who pay no tax, you’ll continue to claim relief at 20% for these individuals. HMRC will not recover the difference between the Scottish starter and Scottish basic rates and you must not give relief at 19% to these members.
Your scheme members who are Scottish taxpayers liable to income tax at the Scottish intermediate rate of 21%, can claim the additional 1% relief due on some or all of their contributions above the 20% tax relief paid to you. You must not give relief at 21% to these members. Instead, a member will do this by contacting HMRC if they do not already complete Self Assessment returns, or through their return if they do.
Check the residency status of your members
Taxpayers who are above the basic rate of Income Tax
If the member is a Scottish intermediate rate taxpayer, or a higher rate taxpayer in Scotland or the UK, they can claim any extra tax relief due through their tax return or by contacting HMRC.
If the member is an additional rate UK taxpayer, or Scottish top rate taxpayer, they’ll have to claim the extra relief through their tax return.
Members information required by the pension scheme
Before you can claim back basic rate tax relief on a member’s contributions you’ll need the following information about the member:
- full name and address
- date of birth
- National Insurance number - or a statement that they do not have one (this information is not needed if the member is under 16 or a non-UK citizen who is not living in the UK)
You also needs details about the member’s employment status. The member will make declarations including one to tell their pension scheme if they make a contribution that does not qualify for tax relief.
Pension schemes normally collect all the required information and member declarations as part of the application form to join the scheme.
How to claim tax relief
You need to register to claim tax relief. You can do this by completing form APSS 103. You’ll also need to send in:
- a completed form APSS 103A for those authorised to make repayment claims
- a copy of the board’s resolution (or equivalent) appointing each authorised signatory
- a bank statement or original paying-in slip for the relevant bank account
You should tell HMRC about any changes to your repayment details by completing a further form APSS 103. If you’re changing who can make repayment claims you should also send a further form APSS 103A.
End of year claim
Once registered to claim tax relief claims for relief on member contributions paid during tax year can be made yearly using form APSS 106. Claims for relief must be made within six years of the end of the relevant tax year.
If you do not want to wait a year to make a claim you can make an interim claim using form APSS105. These claims can cover a maximum of 3 tax months (running from the 6th day of a month to the following 5th) but all the months have to fall in the same tax year.
If you’re making interim claims you still complete an annual claim. Interim claims for the period 6 September to 5 October and any following months will not be paid until HMRC has the annual claim for the previous tax year.
If HMRC gets the claim by the last working day of the month and is satisfied with the claim it will normally be paid on the 21st of the following month or the next working day.
Claimed too much relief at source
If you’ve claimed too much relief at source, you’ll need to tell HMRC and pay back the amount you’ve been overpaid.
Every year you must complete form APSS107 ‘registered pension schemes: annual statistical return’. This must be sent to HMRC by 5 June following the end of the relevant tax year.
You must send HMRC a report of all member contributions paid in the previous tax year. This annual information return can be provided either electronically or on paper - but it must be in a set format. Guidance and specifications for making annual information returns is covered under separate guidance. These must be sent electronically and from April 2019 they must be sent through HMRC’s Secure Data Exchange Service (known as ‘SDES’).
Interim claims for the period 6 July to 5 August and any following months will not be paid until HMRC has the annual information return for the previous tax year.