Scheme Pays: pay now, or from your pension?
How Scheme Pays works, when your scheme must pay, what it costs, the election deadlines including the McCloud remedy deadline, and why you still report the charge on your Self Assessment return.
1 min 29 s · Captions · Official sources checked 30 September 2026 · Published
Transcript
If you have an annual allowance charge, Scheme Pays lets you ask your pension scheme to pay some or all of it to HMRC. In return, your pension benefits are reduced.
Your scheme must agree to pay if the charge is over £2,000, and your pension growth in that scheme is over the standard annual allowance. A tapered allowance is ignored for this test.
If you don't meet those tests, a scheme may choose to pay voluntarily, but the tax stays your liability.
It isn't free. NHS Pensions compares it to a loan: the amount grows with interest until you retire, and is then taken off your pension permanently.
To make your scheme pay, your election normally has to reach it by 31 July in the year after the tax year ends. For 2025 to 2026, that's 31 July 2027. For charges increased by the McCloud remedy, the deadline is 6 July 2027.
Even if your scheme pays, you still report the charge on your Self Assessment return, including the amount the scheme is paying.
Schemes suggest thinking about which route suits your finances, and getting independent financial advice if you need it.
To see whether you could face a charge, start with Remedy's free check at remedy.tax.