Answers · UK 2025/26
What is a net pay arrangement for pension contributions?
Under a net pay arrangement (NPA), pension contributions are deducted from gross pay before income tax is calculated, giving full tax relief automatically.
Full answer
With a net pay arrangement (NPA), pension contributions are taken from gross salary before tax is applied. A £100 NPA contribution effectively costs a basic rate taxpayer £80 (saving 20% tax) and a higher rate taxpayer £60 (saving 40% tax). Non-taxpayers get no tax relief under NPA, unlike relief at source where HMRC adds 20% regardless. NPA is common in workplace defined benefit and many large DC schemes. From April 2024 HMRC introduced a top-up payment for NPA non-taxpayers.
This answer is informational only and does not constitute financial, tax or legal advice. Figures are for the 2025/26 UK tax year. See our methodology and sources.