Changes to pension tax relief – net pay top-up payments

What’s changing?

The UK government has introduced changes to ensure all employees, including non-taxpayers, can benefit equally from pension tax relief. This change is expected to provide around £50 extra per year to around 1.2 million people.

How pension tax relief worked before

If your income was below the personal tax allowance (£12,570), the type of pension scheme your employer used determined whether you received tax relief.

• Relief at source: Contributions are taken after tax, with HM Revenue & Customs (HMRC) adding 20% tax relief to your pension.
• Net pay arrangement: Contributions are taken before tax, meaning non-taxpayers missed out on tax relief.

Changes to net pay arrangements

Starting from the 2024/25 tax year, non-taxpayers in net pay arrangement schemes may receive top-up payments from HMRC. These payments will make up for the tax relief they missed and will be paid directly into their bank accounts.

How it works

HMRC will notify qualifying individuals and issue payments automatically.

When will this happen?

Payments are expected to begin in 2026 for the 2024/25 tax year, with HMRC providing updates closer to the time.

What do you need to do?

Nothing! The system is automatic. If you qualify, HMRC will contact you. If you don’t qualify, you won’t hear anything from HMRC.

Still unsure?

You can check with your employer to confirm eligibility.

Will this impact any of my state benefits?

HMRC has confirmed these payments will not affect your benefit entitlements or National Insurance contributions.

Watch out for scams

HMRC will never ask for personal details like bank information via email, text, or phone. Always verify any HMRC communication using contact details from their official website.

Find out more about HMRC scams or other types of pension scams.