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A sigh of relief?
Key points
- Automatic enrolment into workplace pensions has been successful. But some low earners benefit from tax relief on their pension contributions whereas others in similar circumstances do not.
- The Low Incomes Tax Reform Group’s (LITRG) proposed solution was for HMRC to work out how much tax relief affected individuals would have received in a relief-at-source scheme and pay them an equivalent tax refund.
- The government plans to legislate to address the net pay anomaly.
- From the 2024-25 tax year HMRC will calculate how much tax relief has been missed out on and invite affected individuals to claim a ‘top-up payment’.
Automatic enrolment into workplace pensions has been successful. By harnessing people’s natural inertia it has resulted in many more people saving towards their retirement.
However in recent years this success has shone a spotlight on a wrinkle in the tax system which...
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