One million people set to get £50 payments - but there's a 'real risk' of missing out

Roughly one million people are set to receive letters from HMRC entitling them to £53 on average.

The tax agency is writing to low earners who have missed out on tax relief, 75% of whom are thought to be women.

There is a huge risk these letters will be misidentified by recipients as a scam, warned former pensions minister Steve Webb.

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"The process of getting these payments to the right people is going to be incredibly painful, and there is a real risk of huge non-take-up," he said.

"Most people will not have a clue about this issue and may be suspicious of a letter out of the blue from HMRC offering them free money. Some may suspect it is a scam.

"It is vital that communications are effective to make sure that people get the money to which they are entitled."

The letter-writing campaign begins this month and is set to last into 2027.

Why are the payments being made?

A snag in the rules for tax relief means that people earning less than the personal allowance may be automatically enrolled in a workplace pension where they errantly don't receive tax relief on pension contributions.

This is because many workplace pensions deduct pension contributions from an employee's salary before handing them their pay packet, meaning they will enjoy tax relief on those contributions by receiving less income and therefore paying less income tax.

This is called a Net Pay Arrangement, and it causes problems for someone earning between £10,000 and £12,570 a year.

Automatic enrollment in workplace pensions kicks in when you start earning £10,000 or more a year, but the personal allowance is £12,570.

That means if you earn between those two figures and your employer uses a Net Pay Arrangement, you'll miss out on tax relief on pension contributions because there is no income tax to deduct it from.

This is not a problem for Relief at Source arrangements, where earners make contributions from their take-home pay and HMRC adds basic-rate tax relief, or those paying sufficient income tax.

An HMRC spokesperson said: "Customers don't need to apply or contact us - we'll send them information about how to receive their payment via post or their online tax account.

"We know some people may be cautious about unexpected contact, which is why we provide clear information about what to expect and how to verify the contact is genuine.

"Customers can check a letter is genuine on GOV.UK and should only respond via official HMRC channels. We'll never ask for passwords, PINs or money to be transferred to claim a payment."

(c) Sky News 2026: One million people set to get £50 payments - but there's a 'real risk' of missing out