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HMRC internal manual

Pensions Tax Manual

HM Revenue & Customs
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Contributions: essential principles

Glossary  PTM000001

Making contributions
Tax relief
Record keeping
Form of contributions
Deemed date of contributions
Rules regarding member contributions made at the start or end of a tax year or pension input period

Making contributions


HMRC does not impose limits on the level of contributions that members can pay into registered pension schemes.

If certain conditions are satisfied, tax relief on member contributions will be available on up to 100 per cent of their relevant UK earnings or £3,600 whichever is the greater. The member must be a relevant UK individual for such contributions to qualify for tax relief and relief can only be given if the contribution is made to a scheme that operates the relief at source (RAS) system.

See PTM043000 and PTM044000 for details on tax relief.

Further information on member contributions can be found at PTM042000

Tax relief on member contributions is not available to any scheme member who is aged 75 or over, or for life assurance premium contributions.


Any employer of a member of a registered pension scheme may make contributions to that registered pension scheme.

Further information on employer contributions can be found at PTM043000.

Other persons

A person other than a member or the employer of a member may make a contribution to a registered pension scheme in respect of a member of that scheme. A person can be an individual, a corporate body or other legal entity.

For tax purposes, any contribution that is not an employer contribution will be regarded as if it had been made by the scheme member. This means the member should receive any tax relief due on the contribution, not the person who made the contribution (the guidance set out at PTM044000 applies).

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Tax relief

Contributions that are paid to a registered pension scheme may receive tax relief, but tax relief is not automatic.


There is a limit on the amount of tax relief a member may receive on contributions paid by them, or other persons in respect of them. Any contributions over the tax relief limit may still be paid into the pension scheme, but no tax relief is due on the excess.

Further guidance on tax relief on contributions paid by or on behalf of a member can be found at:

It should be noted that if any portion of contributions that obtain tax relief result in the annual allowance being exceeded, there might be a tax charge on the member for exceeding the annual allowance. Further guidance on the impact of the annual allowance on members, whether from contributions or other accruals, can be found at PTM050000.


Unlike for scheme members there is no set limit on the amount of tax relief that an employer may receive in respect of its contributions. However tax relief is not automatic; it will be considered under the normal tax rules as a business expense.

There are also special rules for where a large one off contribution is made. These special rules allow tax relief to be spread over several years rather than be given in full in the year that the contribution is actually paid.

Further guidance on employer’s entitlement to tax relief can be found at PTM043000.

Claiming tax relief

Tax relief on contributions to registered pension schemes that are paid by members can be given in a variety of ways:

  • the pension scheme can obtain basic rate tax relief from HMRC to add to the member’s contribution to create the gross contribution in the fund. This is called the relief at source method of giving tax relief (see PTM044220); or
  • where a member pays contributions to their employer’s occupational pension scheme tax relief can be given automatically through the PAYE system. Neither the member nor scheme administrator need take any action. The employer deducts the member’s contributions from their gross pay before income tax is calculated on the balance. The employer passes the contribution to the scheme administrator or other body. This is called the net pay arrangement of giving tax relief; or
  • the member makes a claim to HMRC for tax relief on their contribution. The amount of the gross contribution is then deducted from the amount of the member’s total income for the tax year in which the payment is made to calculate tax on the balance subject to normal taxing rules, allowances etc. This may be done through Self-Assessment.

It may sometimes be possible, depending on the circumstances, that more than one method applies in relation to the same scheme or even the same member. However, under section 191(2) Finance Act 2004, relief at source is the default method of giving relief unless the legislation provides for some other method.

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Record keeping

The Pensions Regulator (web) (tPR) imposes more record-keeping requirements than HMRC.

For tax purposes the Registered Pension Schemes (Provision of Information) Regulations 2006 SI 2006/567 sets out that records relating to the following must be preserved:

  1. any monies received by or owing to the scheme;
  2. any investments or assets held by the scheme;
  3. any payments made by the scheme;
  4. any contracts to purchase a lifetime annuity in respect of a member of the scheme; and
  5. the administration of the scheme

The regulations impose a requirement on the scheme administrator, trustees, sponsoring employer of an occupational scheme or any person providing administrative service to keep the records for 6 years from the tax year to which they relate.

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Form of contributions

As well as deductions from the member’s salary, payments in the form of cheques, bank or building society drafts, direct debits, standing orders, faster payments and debit/credit cards can be accepted.

The legislation is framed in such a way that means that contributions have to be paid as cash sums, except in very limited circumstances where the tax rules allow a contribution of shares. These shares must be shares:

  • which the member acquired on exercising a right under a SAYE option scheme (as defined in section 516 Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003)) or
  • which were appropriated to the member under the provisions of a share incentive plan (as defined by section 488 ITEPA 2003).

See PTM042000 for further details.

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Deemed date of contributions

The date of payment of the contribution depends on what method is used to pay it.


The date the cheque is given to, or if posted received by, the scheme administrator.

Debit/credit card

The date on which details are received by the scheme administrator.

Direct debit

The date authorised to draw the sum from the member’s bank account, i.e. the date set out in the direct debit mandate. This is subject to the proviso that:

  • the correctly completed direct debit mandate has been received, and
  • the funds requested under the direct debit mandate are actually received.

Member contribution made via employer deduction through payroll

The employer effectively acts as collection agent for the transmission of employee contributions taken from their pay and passed on to the relevant pension scheme administrator.

The date of payment in the case of a contribution made under the net pay arrangements is the date of deduction from the employee’s pay.

The date of payment for a contribution made under Relief at Source, for example to a group or other personal pension scheme, is the same as a payment the member makes direct. For example the date authorised to draw money by direct debit from the employer’s bank account or the date the employer’s cheque is received.

Faster Payment

Online banking payments complete near-instantly but they are not always guaranteed to do so, users should take account of their bank’s terms under which the payment is made. The use of electronic means to make payments is evolving and it is not possible for this manual to cover them all.

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Rules regarding member contributions made at the start or end of a tax year or pension input period

Tax year

A contribution must not be treated as being made in the earlier tax year where:

  • payment under a direct debit is due on or after 6 April, or
  • payment due under a direct debit before 6 April is re-processed on or after 6 April because it failed to be paid due to lack of funds on its original process date in the earlier year, or
  • payment was late because a cheque which was presented in the earlier tax year was not honoured and when the cheque was re-presented and subsequently cleared it was in the following tax year, or
  • payment using the Faster Payment Scheme was late because the member had initiated payment with too high an expectation of that method, by reference to the agreements under which the payment was processed, and the pension scheme’s terms for accepting contributions (i.e. it maybe could have been processed in time but they were just unlucky, or unrealistic).

The situation is different if payment under a direct debit was due to be paid on or before 5 April (in other words the scheme was expecting payment) but because the date fell on a Saturday, Sunday or Bank Holiday was not actually processed until on or after 6 April. Providing a fully completed direct debit mandate that shows payment was due by 5 April is held and it was processed the next working day it can be accepted that the contribution was made in the earlier tax year.

In order to avoid disputes in this area, some pension providers make arrangements so payments made near to a tax year are held over outside the scheme until the following tax year. Others might simply refuse to accept such payments at all, and send the cheque or payment back. Both approaches can be acceptable under the tax rules providing they are legally effective in deferring or negating acceptance of the contribution under the scheme as appropriate. Such arrangements must not be structured so as to create actions under the scheme or scheme payments, else the pensions tax rules may apply, and the return can be an unauthorised payment.

Pension input period

The same considerations will need to be taken into account where a payment is made close to the beginning/end of a pension input period. Here the 5 or 6 April should be changed to the start/end date of the pension input period.