One million low earners to receive missed pension tax relief payments

Around one million low earners could receive payments for pension tax relief they previously missed out on, after the Government confirmed payments will begin over the coming months.

The payments relate to the long-standing ‘net pay anomaly’, under which some low earners contributing to workplace pension schemes operating on a net pay basis received less tax relief than those contributing through relief at source arrangements.

The Government first announced plans to address the issue in November 2021, with payments now due for the 2024/25 tax year.

HMRC is expected to begin making payments over the coming months, continuing into early 2027.

Previous Government estimates suggested around one million people could benefit, receiving an average annual payment of approximately £70.

Eligible individuals will not need to apply, as HMRC will contact them directly. Payments will be made into individuals’ bank accounts rather than their pensions.

Rachel Vahey, head of public policy at AJ Bell, said: “It is a scandal that around one million of the UK’s lowest earners have missed out on valuable pension tax relief because of the so-called ‘net pay anomaly’.

“While the government deserves credit for finally delivering a solution and putting it into legislation, the first payments to those affected have been a long time coming.