What’s the net tax basis?

Net tax basis is the way contributions are deducted from your employees’ wages after tax is taken. We’ll automatically set you up on this arrangement when you sign up with us. HM Revenue & Customs (HMRC) call it ‘relief at source’.

Net tax basis is great for lower paid employees because:

  • Under this tax basis, you’d deduct employee contributions from their pay after tax is taken.
  • Then, we claim tax relief – at the basic 20% rate of tax – from HMRC.
  • And it’s then added to your employee’s pension savings – even for any employees who don’t pay tax.

All your employees will get the basic 20% rate in tax relief added to their pension savings, even if they don’t pay tax. We must have a National Insurance number and up-to-date personal details for the employee to apply tax relief.

For example, even if they earn less than the standard personal allowance of £12,570 a year (for the 2022/23 tax year) we’ll still apply tax relief.

And any higher or additional rate taxpayers will need to claim the extra tax relief direct from HMRC through their tax returns or by speaking to HMRC.

Example – Mike doesn’t earn enough to pay tax. £8 goes from his wages into his pension pot. Then The People’s Pension claims 20% in tax relief, adding an extra £2 to Mike’s pension pot – the same 20% rate as a basic rate taxpayer.


If you’d like more information on tax relief, visit our webpage ‘Helping you with tax relief’, or visit HM Revenue & Customs or The Pensions Regulator’s website.

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