Net Pay Arrangement Pension Calculator 2026/27
A net pay arrangement (NPA) pension deducts contributions before income tax is worked out, so full marginal-rate relief lands automatically through payroll — no Self Assessment claim needed. 1 This calculator shows your net cost, take-home impact and how NPA stacks up against relief at source.
- Net pay deducts contributions before tax, so full marginal-rate relief is automatic — no Self Assessment. 1
- A 40% taxpayer pays roughly £60 net for every £100 in the pension. 3
- It's the cleanest route for Scottish taxpayers above 20% — the right Scottish rate applies automatically. 2
- Earn below £12,570 and net pay gives no relief, where relief at source still adds 20%. 2
- Self-employed people can't use net pay — a relief-at-source SIPP is the standard route. 1
How net pay arrangement works
Under a net pay arrangement, your pension contribution is deducted from gross salary before income tax is calculated. Taxable income is reduced by the full contribution. Income tax is charged on a lower figure.
| Gross pension contribution (deducted before tax) | £5,000 |
| Taxable income falls from £55,000 to | £50,000 |
| Relief at 40% on £4,730 above the £50,270 threshold | £1,892 |
| Relief at 20% on the remaining £270 | £54 |
| Total relief through payroll (no SA claim) | £1,946 |
| Real net cost of £5,000 in the pension | £3,054 |
NPA vs relief at source: key differences
| Feature | Net Pay | Relief at Source |
|---|---|---|
| Basic-rate relief | Automatic through payroll | Automatic via provider claim |
| Higher-rate relief | Automatic through payroll | Must claim via SA or PAYE code |
| Scottish rates | Correct rate automatically | Always 20%; claim difference via SA |
| Low earners (below PA) | No relief, no tax to offset | 20% top-up still given (up to £3,600 gross) |
| Self-employed | Not available | Standard method for SIPPs |
| Self Assessment needed? | No (for pension element) | Only if higher/additional rate taxpayer |
Scottish taxpayers and net pay
NPA is the cleanest arrangement for Scottish taxpayers paying above 20%. Contributions come off salary before Scottish income tax is calculated, so the correct Scottish rate (19%, 20%, 21%, 42% or 45%) applies automatically. Under relief at source, providers always claim 20%, so Scottish intermediate (21%) taxpayers must claim the extra 1% via Self Assessment. Scottish higher (42%) taxpayers must claim 22% extra.
Take a Scottish worker in an NPA scheme at 42%: a £5,000 contribution saves £2,100 in tax, leaving a net cost of £2,900. No SA needed. Under relief at source, only £1,000 (20%) is claimed automatically. The £1,100 extra has to be claimed separately.
Frequently asked questions
How do I know if my pension is a net pay arrangement?
Check your payslip. Under NPA, the pension contribution appears as a deduction that reduces your taxable pay, your income tax is calculated on the lower figure. If your taxable pay equals your gross salary (with a pension deduction after tax), you are in a relief at source scheme instead.
What if I earn below the personal allowance, do I get any relief?
Under NPA, no, there is no income tax to offset against, so no relief is applied. The government introduced a compensatory top-up from 2024/25 for NPA low earners, but delivery has been inconsistent. Under relief at source, low earners still receive the 20% top-up (up to £3,600 gross/year), making RaS more beneficial for lower earners. If you earn below the personal allowance and your scheme is NPA, speak to your employer about options.
Does NPA affect salary sacrifice?
They are separate mechanisms. Net pay arrangement is a tax relief method; salary sacrifice is a contractual pay reduction. Salary sacrifice is generally superior to NPA because it also saves National Insurance. Some employers operate salary sacrifice for some contributions and NPA for additional voluntary contributions, ask your payroll team for the breakdown.
Sources & references
- Pension tax relief — GOV.UK
- Workplace pensions — GOV.UK
- Income Tax rates and Personal Allowances — GOV.UK
Every headline figure above is checked against the official GOV.UK / HMRC guidance listed here for the 2026/27 tax year. Links open on GOV.UK.
Disclaimer: Estimates only, not financial or tax advice. 2026/27 rates.