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<p>The Government does not hold complete data on whether a master trust pension scheme
operates net pay or relief at source.</p><p> </p><p>Pension schemes are not required
to tell HMRC if they use the net pay arrangement. They do have to register with HMRC
to use relief at source.</p><p> </p><p>Pension schemes have only been required to
declare whether they are a master trust during tax registration since April 2018.
Schemes that were already registered at that date have not been required to inform
Her Majesty’s Revenue & Customs that they are a master trust. They are required
to inform HMRC if they become or cease to be a master trust.</p><p> </p><p>The tax
relief provided under net pay reflects an individual’s marginal rate of tax. Under
relief at source, all savers receive a flat rate of 25%, equivalent to the basic rate
of tax, regardless of their marginal rate of tax. This means that lower earners in
relief at source schemes may receive extra tax relief. Higher and additional rate
taxpayers can claim any further relief to which they are entitled from HMRC. This
was designed to simplify the administration of personal pensions.</p><p>The government
recognises the different impacts of the two systems of paying pension tax relief on
pension contributions for workers earning below the personal allowance. To date, it
has not been possible to identify any straightforward or proportionate means to align
the effects of the net pay and relief at source mechanisms more closely for this population.</p><p>
</p><p>However, the government’s ambition for HMRC to become one of the most digitally
advanced tax administrations in the world may present opportunities to look afresh
at the two systems of paying pension tax relief, to explore the current difference
in treatment, and ensure that we can make the most of any new opportunities, balancing
simplicity, fairness, and practicality.</p><p> </p><p> </p>
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