Tax: it’s all getting a bit of a drag. The number of people paying the highest level of income tax has almost doubled since Labour came to power, according to recent statistics.

“Fiscal drag” — a fancy name for failing to uprate tax thresholds and allowances in line with wage inflation — has meant that many hundreds of thousands of middle earners (such as higher-paid teachers, nurses, police officers and many civil servants) have been trapped into paying 40 pence to the Exchequer for every pound on some of their earnings.

Around 3.7 million people are estimated to pay higher-rate tax, up from just over two million in 1997.

That figure, estimates the Institute for Fiscal Studies, will rise to more than 4 million by the end of the current tax year, due to fiscal drag alone. Indeed, the individual taxpayer has borne the brunt of Labour’s tax policies, according to a report by accountancy firm BDO Stoy Hayward released to coincide with “tax freedom day” earlier this month.

Higher-rate tax now starts for many at 41,435 pounds (the personal allowance of 5,435 pounds plus the basic-rate tax band of 36,000 pounds). But with some careful planning those dragged into the higher-rate tax net could save some or all of the extra tax levied by paying money into a private pension — and pave the way for a rosier retirement.

You should always try to make a pension contribution which attracts higher rate tax relief. So, if you’re earning 50,000 pound per annum and make a contribution of no more than 8,565 pounds (50,000 pounds minus the starting point for higher-rate tax of 41,435 pounds), this will attract tax relief at 40 percent — boosting your pension contribution by 3,426 pounds that would otherwise have gone to the tax man.

There are other ways, too, to maximise the amount of pension contributions that receive 40 percent tax relief, says Malcolm Cuthbert, managing director of financial planning at independent financial services group Killik & Co: take into account other sources of earned pensionable income — such as bonuses, redundancy payments (if above the first 30,000 pounds, which is tax free), as well as holiday lets (although not rental income).

Most importantly, do not forget to claim back the entitlement for higher-rate relief annually on your tax return. Although basic-rate relief of 20 percent is paid at source on personal pension contributions, the other 20 percent of higher-rate relief must be reclaimed on your tax return.

“Making your personal finances as tax efficient as possible is a no-brainer that will help ensure your money lasts as long as you do,” says Cuthbert. “One of the smartest ways to achieve this is to claim higher rate tax relief whilst you’re working — and then engineer your affairs so you pay basic rate tax in retirement.” Now, that’s a nice little way of getting one up on the tax man.