New Pensions Tax Relief for Low-Income Earners

The government has published proposals for a new Pensions tax relief where HMRC will make a top-up for payments to lower-paid non-taxpayers who cannot currently benefit from tax reliefs. This will positively affect approximately 1.2 million individuals, 75% of whom are women, by an average of £53 a year – everything helps when planning for retirement!

What are the proposed changes to pension tax rules?

The proposals, entitled: 'Pensions: relief relating to net pay arrangements' will allow HMRC to make a top-up for payments to lower-paid taxpayers who are within net-pay pension arrangements.

Under the proposed new changes, effective from 2024/25, HMRC will make top-up payments directly to individuals who save into an occupational pension under net pay arrangements but whose total taxable income is below the personal allowance. As a result, low-earning pension savers should receive similar outcomes regardless of how their pension scheme is being administered for tax purposes.


Why is this pension tax relief being proposed?

Lower-paid workers, whose income is less than their personal allowance and who contribute to their workplace pension schemes have long been at a disadvantage to taxpaying contributors. They cannot, as non-taxpayers, benefit from any tax rules which provide for tax relief at source, and that is how tax relief for pension contributions is given. This group of workers receive lower net wages as a result.


How do I know if I qualify for the new pension tax relief?

In order to qualify for the tax relief, you must be eligible to receive a personal allowance and be contributing to a workplace pension scheme.

HMRC will notify those who are eligible for the tax relief and invite them to provide details to allow payment directly into their bank account.

HMRC will make the payments as soon as is reasonably practical following the tax year in which the contribution was paid.


Speak to your personal tax advisor

If you are unsure whether you will qualify for the new pension tax relief, speak to your accountant or personal tax advisor. Our Tax Manager, Nickie Antley-Slater is able to help you with advice based on information you can provide about your income and employment. Contact Nickie on 0161 905 1801 in Manchester or 01925 830 830 in Warrington, or you can email