Tax relief for your pension scheme

What do you need to know? We take a look at the way you'll need to treat tax relief when you calculate your employees pension contributions.

Tax relief for your pension scheme

All basic rate tax payers are entitled to receive twenty per cent tax relief on their pension contributions, which is good news for your employees.

There’s more than one method for paying tax relief into a pension scheme. Aviva’s workplace pension scheme uses the relief at source tax method to apply tax relief to your employees’ pension schemes.

What does this mean?

It means you’ll need to deduct pension contributions from an employees net pay rather than their gross pay.

So, if your employee is contributing 1% to their pension scheme, you’ll only take 0.8% from their salary after tax has been deducted. The 0.2% tax relief they receive will then be reclaimed from HMRC by Aviva, and added to their pension pot. This means is an employee is making a 1% pension contribution, they’ll only see the 0.8% deduction on their pay slip.

What they’ll see on their payslip

Monthly pay: £2,000.00
1% pension count: £20.00
Taxable pay: £2,000.00
NI able pay: £2,000.00
Tax paid: £217.00
NI paid: £159.00
Pension deduction: £16.00
Take home pay: £1,608.00

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