HM Revenue and Customs (HMRC) is preparing to contact around one million people who could be due an average payment of £70 after missing out on tax relief on their workplace pension contributions.
The payments are being made to address a long-standing difference affecting some lower-paid workers saving into workplace pensions through net pay arrangements. HMRC previously confirmed eligible people would begin receiving payments relating to the 2024/25 tax year during 2026 and into early 2027.
However, new details highlighted by MoneySavingExpert (MSE.com) reveal the scale of the rollout, with around one million people expected to receive payments worth an average of approximately £70.
Who could get the £70 payment?
The payments are aimed at lower earners who contributed to a workplace pension operating under a net pay arrangement during the 2024/25 tax year but did not receive the full benefit of pension tax relief.
Under a net pay arrangement, pension contributions are deducted from someone's pay before Income Tax is calculated. Workers who pay Income Tax therefore effectively receive tax relief on their contributions automatically.
However, someone whose taxable income is below or close to the Personal Allowance threshold of £12,570 may not pay enough Income Tax to receive the full benefit. This has historically left some lower-paid workers receiving less support towards their pension savings than equivalent workers whose pension operates under a relief-at-source arrangement.
The new HMRC payments are intended to address that difference. The £70 figure is an average rather than a fixed payment, so some people will receive more or less depending on their individual circumstances and pension contributions.
How HMRC will contact people
Eligible workers do not need to contact HMRC to ask for the payment. HMRC will identify people automatically and send them a letter explaining what they need to do.
MSE.com said people with a Personal Tax Account should also receive a notification there. It's important to be aware HMRC will not contact people about these payments by phone, text message or email.
Anyone contacted through one of those methods claiming they need to provide information to receive the pension tax-relief payment should be wary of a potential scam.
Will the payment affect benefits?
The payment will not reduce someone's entitlement to means-tested benefits. Regulations covering the new system were introduced specifically to ensure the additional money is disregarded when benefit entitlement is calculated.
The payment itself is also not taxable. Entitlement is assessed for each individual tax year, beginning with pension contributions made during 2024/25.
HMRC previously told workers not to contact the department to find out whether they qualify and instead to wait to be contacted. It said: “Individuals do not need to contact HMRC. Eligible individuals should wait to be contacted by post or through their personal tax account and follow the instructions provided to accept their payment.”
