Quick answer
The payment is designed to help lower-paid employees who contributed to a workplace pension through a net pay arrangement but did not receive the same tax-relief benefit as somebody using a relief-at-source pension scheme. HMRC will identify eligible individuals and contact them directly. Employers do not need to apply, assess eligibility or amend payroll records.
Some employees may soon approach their employer or payroll team after receiving an unexpected message from HM Revenue & Customs.
From August 2026, HMRC is contacting eligible individuals about what it calls the low earner’s pension payment. The measure was previously referred to as the low earner’s anomaly.
The payment is intended to create a fairer outcome for lower-paid workers whose pension contributions were made through a particular type of workplace pension arrangement.
Although employers do not need to process the payment, it is useful to understand why employees are being contacted and what payroll teams should tell them.
What is the low earner’s pension payment?
Tax relief on workplace pension contributions can work differently depending on how the pension scheme is set up.
In a net pay arrangement, the employer deducts the employee’s pension contribution from their earnings before calculating PAYE Income Tax. This normally provides tax relief automatically at the employee’s marginal rate.
However, an employee whose earnings are at or below the Personal Allowance may pay little or no Income Tax. As a result, there may be no Income Tax against which relief can be given.
In a relief-at-source arrangement, the pension contribution is deducted after PAYE. The pension provider then claims basic-rate tax relief from HMRC and adds it to the employee’s pension pot.
This created a difference in outcomes for some lower-paid employees, depending on the pension scheme used by their employer. The new payment is intended to address that difference.
| Pension arrangement | How contributions are deducted | How tax relief is provided |
|---|---|---|
| Net pay arrangement | Before PAYE Income Tax is calculated | Automatically through payroll, where the employee has sufficient taxable income |
| Relief at source | After PAYE Income Tax is calculated | The pension provider claims basic-rate tax relief from HMRC and adds it to the pension pot |
HMRC will assess eligibility for each tax year separately. An individual may therefore qualify for one or more tax years beginning with 2024/25.
Who may be eligible?
According to HMRC, an employee may be eligible where they did not obtain Income Tax relief on their workplace pension contributions in a tax year from 2024/25 onwards.
This may apply where both of the following conditions were met:
Earnings close to the Personal Allowance
HMRC says this will typically involve earnings close to the £12,570 Personal Allowance.
Contributions through a net pay arrangement
The employee must have contributed to a workplace pension scheme operating a net pay arrangement.
Employers do not need to decide whether an employee qualifies. HMRC will use the information available to assess eligibility and will contact the individual directly.
What employers need to do.
For the payment itself, the employer’s responsibilities are limited. HMRC has confirmed that employers and payroll teams do not need to:
- apply for a payment on an employee’s behalf
- assess whether an employee is eligible
- amend payroll records to process the payment
- contact HMRC for the employee
- confirm the employee’s pension arrangement as part of the payment process
Eligible employees should wait to hear from HMRC. Contact may arrive by post or through the employee’s personal tax account.
Once contacted, the employee should follow HMRC’s instructions to accept the payment.
Employers should also warn employees about scams.
Whenever HMRC announces that it will contact people about money they are owed, criminals may attempt to imitate the communication.
HMRC states that it will never ask an individual to transfer money or provide their PIN codes or passwords.
Employees who are uncertain about a message should avoid using unexpected links and check the communication against the official
GOV.UK guidance for genuine HMRC emails
.
Why accurate pension reporting still matters.
The payment does not require employers to change payroll records. However, HMRC has separately reminded employers to make sure pension contributions are being reported through Real Time Information correctly.
Payroll software distinguishes between contributions paid under a net pay arrangement and those paid under relief at source. Reporting contributions in the wrong field can result in tax relief being applied incorrectly.
In some circumstances, incorrect reporting may result in the employer becoming responsible for Income Tax that was under-deducted and not paid to HMRC.
Practical step: Employers who are uncertain about the type of pension arrangement they operate should check with their pension provider and make sure their payroll software uses the correct reporting fields.
Where an employer discovers that contributions have been reported incorrectly, HMRC says the payroll configuration should be corrected immediately. Previous errors may also need to be disclosed.
You can also read our guide to
the true cost of getting payroll wrong
.
What should employers tell their staff?
Wait for HMRC
Employees do not need to contact HMRC before receiving an official communication.
Check their tax account
Eligible employees may receive information through their personal tax account or by post.
Follow the instructions
HMRC will explain what the employee needs to do to accept any payment due.
Remain scam-aware
Employees should never share passwords, PIN codes or transfer money in response to a message.
Final thoughts.
Most employers will not need to take any direct action when HMRC begins contacting employees about the low earner’s pension payment.
Nevertheless, payroll and HR teams should understand the reason for the communication. This will help them answer basic employee questions, reduce concerns about unexpected HMRC messages and direct staff towards official guidance.
It is also a useful opportunity to confirm that workplace pension contributions are being recorded and reported correctly. Pension reporting errors can affect tax calculations, employee records and the employer’s position with HMRC.
Need support with payroll or workplace pensions?
Reliable payroll involves more than producing payslips. Our Payroll & HR team can help you manage PAYE reporting, workplace pension submissions, employee records and ongoing payroll compliance.
Official guidance: Further information is available in HMRC’s
June 2026 Employer Bulletin
.
Frequently asked questions.
What is the low earner’s pension payment?
It is a payment intended to address the difference in tax-relief outcomes experienced by some lower-paid employees who contributed to a workplace pension through a net pay arrangement.
Does an employer need to apply for the payment?
No. HMRC will identify eligible individuals and contact them directly. Employers do not need to apply, assess eligibility or contact HMRC on an employee’s behalf.
Will the payment be processed through payroll?
Employers do not need to process the payment or amend their payroll records. HMRC will contact eligible individuals and provide instructions for accepting the payment.
Do all employees earning less than £12,570 qualify?
No. Eligibility depends on the individual’s earnings, pension contributions, tax position and whether their workplace pension operated a net pay arrangement. HMRC will assess each tax year separately.
How will an employee know whether an HMRC message is genuine?
HMRC correspondence can be checked against guidance on GOV.UK. HMRC says it will never ask an individual to transfer money or share their PIN codes or passwords.
Should employers check how pension contributions are reported?
Yes. This is separate from the low earner’s payment, but employers should make sure their payroll software correctly distinguishes between net pay and relief-at-source pension contributions.
