Supplements to net pension remuneration will start by 2026-2027 – Law and regulations


Ready to go: The first top-ups for people making pension contributions to net pay schemes will be provided by the government by the 2026-27 tax year, the Treasury has confirmed.

In October 2021, the government announced that low-income people contributing to take-home pay schemes would be eligible to apply for top-ups from 2024-25.

At the time, Economic Secretary to the Treasury John Glen said the initiative would “largely equalize the results for all low-income savers”.

There are currently two ways for the government to provide tax relief for pensions, but low-income people with taxable income below the personal allowance may receive different levels of take home pay depending on how their schemes work. are managed.

Low-income people using relief at source receive a 20% top-up to their retirement savings, even if they pay no income tax.

However, if they are in schemes using a net remuneration system, they receive tax relief at their marginal rate. This may result in no relief if their income is below the personal allowance, reducing their take-home pay compared to those on a payroll allowance.

In response to a call for evidence from the Work and Pensions Committee, HMT has now confirmed that the first top-ups for those on net pay schemes will be based on contributions made during the 2024-25 period and will be paid from 2026-27.

“The IT changes required to implement this are complex,” reads HMT’s response.

“Given other ongoing HMRC delivery schemes, the system changes will be in place by April 2025.

“Paying the supplement in arrears reduces the burdens on individuals, employers and pension plans.”

The tax situation of individuals is not known until the end of the tax year when all sources of income can be identified. Paying top-ups during the tax year would risk paying ineligible savers, the Treasury added.

It predicts that in 2025-26 up to 1.2 million individuals, three-quarters of whom are women, could receive supplements worth a total of between £60m and £70m a year. He expects the average top-up to be around £50 a year.

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