PSI2.1.10 - Taxation Background: General – Schedule E - Net Pay Arrangement

(This archived guidance relates to HMRC discretionary practice before the 6th April 2006. For current guidance on Registered Pension Schemes see the Registered Pension Schemes Manual)

[PN4.3]

Tax relief on employee contributions other than those made to a free-standing additional voluntary contribution scheme (see PSI1.1.20-21) is given through the PAYE system. PAYE tax is computed on the net amount of pay after deduction of the pension scheme contributions. This is commonly referred to as the net pay arrangement. More information is given in the Employer’s Further Guide to PAYE (P7), a copy of which is held in the Office Library. All employers should have a copy but if not, they can obtain a copy from their Tax Office.