HMRC Pension Top-Up: 1m Low Earners Owed About £70

Two things landed from HMRC this fortnight, and both are about money you may already have lost without knowing. One is a payment being offered to about a million people. The other is a warning about deductions on your payslip that never reached the taxman. Neither is large in isolation. Both are worth ten minutes.

The low earner’s pension payment: about a million people, averaging £70

HMRC has started a campaign to compensate people who missed out on pension tax relief because of how their workplace scheme is run. It was reported on 8 September and affects roughly one million people, around 75 per cent of them women.

The cause is the net pay arrangement. In a net pay scheme, your pension contribution comes out of your salary before income tax is worked out, so you get relief automatically at your marginal rate. That works perfectly if you pay tax. If your taxable income is below the £12,570 personal allowance, you were not paying income tax to get relief from, so you got nothing. Someone in a relief at source scheme on the identical salary would have had 20 per cent added to their contribution by HMRC regardless. Same job, same contribution, different pension, purely because of the scheme your employer picked.

The payment fixes that. It is worth 20 per cent of your gross workplace pension contributions for a tax year in which your total taxable income fell below the personal allowance, it covers 2024/25 for now with later years assessed separately, and it will not be backdated before 2024/25. The average is £70. HMRC has not published a minimum or maximum. Letters are expected between late 2026 and early 2027, so a September start does not mean a September letter. You will accept by giving bank details through your Personal Tax Account or by phoning the number on the letter, and you have four years from the end of the relevant tax year to do it.

Two practical points. First, the scam version of this letter is inevitable, so remember what HMRC will not do: it will not call, text or email you about this, and it will never ask for a money transfer, a PIN or a password. Second, the reason this happened at all is worth understanding if you are choosing where to put money, because tax relief mechanics differ by wrapper and by income. Pension tax relief explained covers how relief actually reaches your pot, UK pensions explained covers the scheme types, and if you are weighing a pension against an ISA on a low income, SIPP vs workplace pension vs ISA is the order-of-operations version. The story is at MoneySavingExpert.

HMRC’s new payslip fraud guidance: check the deductions actually arrived

The second item is thinner on headlines and heavier on consequences. HMRC has published guidance for agency workers, temporary workers, contractors and anyone paid through an umbrella or payroll company on how to spot payslip fraud. It was flagged in the tax press on 9 September.

Payslip fraud is when your payslip, or your CIS deduction statement, shows income tax and National Insurance being deducted that was never paid over to HMRC. It is usually a symptom of organised labour fraud, where someone in the supply chain is collecting the deductions and keeping them. The worker is the one left with a record that does not match HMRC’s, which can mean a tax bill, a gap in the National Insurance record that feeds your state pension, or both.

HMRC’s advice is to compare the tax and National Insurance shown on your payslip against what is recorded in your Personal Tax Account or the HMRC app. The warning signs it lists are worth memorising if you contract: unexpected changes to take-home pay, a different employer name appearing on your payslip, being moved frequently between payroll companies, unexplained “admin adjustments”, and suddenly losing access to an online payslip portal.

The National Insurance angle is the one people underrate. Qualifying years are what build your state pension entitlement, and a year that never got paid across is a year that may not count. If you have been through several umbrella companies, checking your record is a five-minute job with a long payback. State pension explained covers the 35-year rule and how much a missing year is actually worth. The guidance is summarised at ICAEW.