Around 1.2 million workers will be forced to wait longer for a tax relief top-up in their take-home pay after HMRC confirmed that payments will be delayed
Over a million low-income workers will reportedly have to wait longer for a long-promised pension tax relief top-up, as HMRC confirmed a delay in payments originally planned for this year. Approximately 1.2 million workers who were expecting an increase of up to £100 in their take-home pay in 2024/25 will now have to wait until 2026 to receive their money, officials say.
The delay is reportedly due to complications regarding benefit entitlements and National Insurance, according to HMRC. The government had initially pledged to address a long-standing issue in pension tax relief that has unfairly left many of the lowest earners without the extra boost others receive.
Under the current system, workers whose employers use a “net pay” arrangement for pension contributions do not receive any tax relief if their income is below the £12,570 personal allowance. In contrast, those in “relief at source” schemes get a 20% uplift, even if they do not pay income tax. To correct this, ministers promised that affected workers would receive a cash top-up each year. When the policy was first announced, payments were expected to begin in 2024/25, with approximately 200,000 workers set to gain the full £100.
But the latest delay means these workers will now have to wait longer for their rightful payments. A spokesperson for HMRC explained to the Sun: “The delivery timetable has been extended to ensure these payments won’t impact benefit entitlement or National Insurance. Top-up payments relating to the 2024-25 tax year, expected in 2025-26, will be made later in 2026. Subsequent payments for future years will go ahead as planned.”
The former pensions minister, Steve Webb, now a consultant at LCP, has criticised the delay in payouts, warning that those affected have already been losing out for years. Speaking to The Sun, he said: “There have been promises of action for years, but now we learn that payouts are going to be further delayed. These workers have already missed out on around £70 in tax relief for 2024/25 and will be forced to wait even longer to get what they are owed. It is vitally important that HMRC gets this scheme up and running swiftly and ensures that as many people as possible receive their entitlements.”
HMRC has confirmed that those impacted will be contacted directly and asked to provide bank details so that payments can be made. Unlike traditional pension tax relief, the top-up will be paid directly into workers’ bank accounts rather than into their pension funds.
To qualify for the scheme, workers must meet the following criteria at the end of the tax year:
- Have a taxable income below £12,570 (after pension contributions).
- Have made personal contributions into a workplace pension.
- Be enrolled in a pension scheme using the “net pay” arrangement.
The payment will match the tax relief these workers should have received. For instance, a worker who contributed £500 to their pension under the net pay arrangement will receive a £100 top-up from HMRC. Although the delay may be frustrating for many, those affected are encouraged to keep their details current with HMRC to prevent additional delays when the payments eventually arrive in 2026.