HMRC Net Pay Arrangement Campaign Targets 1.2 Million Low Earners

HMRC’s net pay arrangement top-up campaign is now under way, with the tax authority beginning to contact an estimated 1.2 million low earners who missed out on pension tax relief because of how their workplace pension was structured. The snippet figure of ‘around one million’ is superseded by the GOV.UK official publication on net pay relief, which puts the affected population at 1.2 million. HMRC says the average top-up is worth £70, paid by bank transfer.

How the net pay arrangement gap left low earners short

A net pay arrangement (NPA) is a pension contribution method under which contributions are deducted from gross pay before income tax is calculated. For workers earning enough to pay tax, this delivers relief automatically. The problem arises for those earning between £10,000 and £12,570, who are automatically enrolled into workplace schemes but fall below the personal allowance and pay no income tax. Under an NPA, there is no tax to offset, so no relief is received.

Had those same workers been enrolled in a scheme using the relief at source (RAS) method, the employer would claim 20% basic-rate relief from the government on their behalf. The Pensions Regulator notes that large employers often use trust-based schemes, which typically operate NPA, while group personal pensions tend to use RAS. Employees have no say in which method their employer chooses.

HMRC will determine eligibility for the top-up using two tests: whether the individual contributed to a net pay scheme, and whether their total taxable income fell below the personal allowance for that year. Eligibility is assessed tax year by tax year, so qualifying in 2024/25 does not guarantee payments in subsequent years.

What the HMRC letters will say — and when to expect one

Letters and personal tax account notifications will roll out gradually from this month and into early 2027. Each communication will explain what recipients need to do to accept their payment, which requires confirming or providing bank details through a digital service. The Low Incomes Tax Reform Group (LITRG) notes that HMRC is unlikely to make contact about 2024/25 payments until summer 2026, which is later than originally planned.

To illustrate the sums involved, LITRG gives the following example: a low earner who contributed £300 to a net pay scheme would be entitled to a top-up of £60 (£300 x 20%), which HMRC should write to inform them about in 2026. Action is required: without the recipient providing bank details, no payment is made.

An HMRC spokesperson said: ‘Customers don’t need to apply or contact us — we’ll send them information about how to receive their payment via post or their online tax account. We know some people may be cautious about unexpected contact, which is why we provide clear information about what to expect and how to verify the contact is genuine.’

The spokesperson added that HMRC will never ask for passwords, PINs or money to be transferred to claim a payment, and that recipients can verify a letter’s authenticity on GOV.UK.

The scam fear that could cost low earners real money

Steve Webb, former pensions minister and now a partner at pension consultants LCP, has raised a practical concern about take-up. Most of the 1.2 million affected workers will have no prior knowledge of the NPA issue, and a letter from HMRC offering money unprompted may look like a phishing attempt.

Webb said: ‘The process of getting these payments to the right people is going to be incredibly painful and there is a real risk of huge non take-up. Most people will not have a clue about this issue and may be suspicious of a letter out of the blue from HMRC offering them free money.’

He is urging people to check their post carefully over the coming weeks. HMRC has confirmed it will never ask for passwords or PINs, and that anyone uncertain about a letter can check its authenticity against guidance on GOV.UK before responding through official channels only.

Who qualifies, and why 75% of those affected are women

The top-ups cover the 2024/25 tax year onwards. HMRC’s own estimates show that 75% of those affected are women, a pattern the government attributes to part-time working patterns and career breaks that keep earnings below the personal allowance. Once registered and confirmed as eligible, workers should move to a more automated system for future-year top-ups, though continued eligibility is not guaranteed year to year.

The practical first step is to watch for a letter or a notification in your personal tax account, then use the digital service HMRC provides to confirm payment details. Summer 2026 is the earliest most recipients should expect contact about the 2024/25 year, making vigilance over the next twelve months the most straightforward thing eligible workers can do.