Relief at source (with basic rate tax relief)

Setting Up Relief at Source Basic rate tax relief(Most common with NEST) The pension is caculated after tax and NI. However, basic rate tax relief is applied to the deduction. Pensions with Basic Rate Tax Relief

If you’re offering a Relief at Source pension scheme, you can set up your pensions in Every Payroll Payroll to apply basic rate tax relief to your employees' contributions.

How to Apply Basic Rate Tax Relief to Relief at Source Pensions

Go to the Pension Scheme Every Payroll and check the box labeled Subtract Basic Rate Tax on the Settings tab. This only appears if the Pension Rule is set to 'Relief At Source'. This will apply basic rate tax relief to your employees’ contributions, whether they are percentage-based or a fixed amount.

Example of Basic Rate Tax Relief

Here’s how basic rate tax relief impacts an employee’s pension contribution:

Suppose an employee contributes 5% of their salary to their pension.

With basic rate tax relief applied, the effective contribution is reduced to 4%.

This adjustment means that the employee’s actual contribution amount will be 4% of their salary after basic rate tax is subtracted.

National Insurance A system of contributions paid by workers and employers in the UK, which funds various state benefits, such as the State Pension and Jobseeker's Allowance. Number Requirement:

Basic rate tax relief will only be applied if the employee’s National Insurance number is entered in Every Payroll. If an employee does not have a National Insurance number entered, the basic rate tax will not be subtracted from their pension contributions.

Note on AVCs (Additional Voluntary Contributions):

Basic rate tax relief will not automatically apply to AVC amounts. If you want basic rate tax relief subtracted from AVCs, adjust the AVC amounts manually when entering them in Every Payroll.