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    Being an employer → Pension auto-enrolment

    Pension Auto-Enrolment — TPR Duties + 8% Combined + NEST

    Pensions Act 2008 obliges every UK employer to assess workforce monthly, automatically enrol eligible jobholders (aged 22 to State Pension Age and earning over £10,000/year), maintain a qualifying pension scheme with minimum contributions (3% employer + 5% employee = 8% combined of qualifying earnings), process opt-outs within a one-month window, complete triennial re-enrolment, and submit a Declaration of Compliance to The Pensions Regulator within 5 months of duties start date. NEST (the government-backed scheme) is widely used and free for employers. TPR enforcement: fixed £400 penalty, escalating daily penalties up to £10,000/day for larger employers, and criminal prosecution for serious wilful breaches.

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    Guidance, not advice. We explain the rules, we don't assess your situation. Always seek financial or tax advice from your accountant, or contact HMRC. Read our editorial scope →

    In plain English

    Auto-enrolment is automatic — meaning the employer does it without the worker asking. Workers can opt out within one month of being enrolled (and get their contributions back), but must be re-enrolled every 3 years regardless of prior opt-out. Three duties run continuously: (1) monthly assessment of every worker against age + earnings triggers; (2) maintain a qualifying pension scheme and pay minimum contributions; (3) triennial re-enrolment with a fresh Declaration of Compliance to TPR. Minimum contributions are calculated on 'qualifying earnings' — the band between £6,240 and £50,270 (frozen for 2025/26). So for a worker earning £30,000, the qualifying earnings are £30,000 − £6,240 = £23,760. Minimum employer contribution: 3% × £23,760 = £712.80/year. Minimum employee contribution: 5% × £23,760 = £1,188/year. Total combined 8%. Many employers use 'pensionable pay' definitions instead of qualifying earnings, in which case contribution percentages are recalibrated. NEST is the government-set-up default scheme — free for employers, simple, accepts any size workforce. Alternative providers (The People's Pension, Smart Pension, Aviva, Standard Life, NOW: Pensions) compete on investment performance + employer experience. A sole-director Ltd Co with no other employees is generally exempt from AE duties (no 'workers' present). The exemption stops the moment a second employee is hired or a director becomes a worker rather than a sole office-holder.

    How it works

    Three categories of worker

    Eligible jobholder: aged 22-SPA + earning >£10,000 → auto-enrol. Non-eligible jobholder: aged 16-74 + earning between £6,240-£10,000, OR aged 16-21 + earning >£10,000, OR aged SPA-74 + earning >£10,000 → no auto-enrol but can opt in to employer contributions. Entitled worker: aged 16-74 + earning <£6,240 → no auto-enrol; can opt in but employer not obliged to contribute.

    Duties start date + Declaration of Compliance

    Duties start the day the first worker is employed. Within 5 months of duties start, file Declaration of Compliance with TPR (online). Failure: TPR fixed £400 penalty, escalating thereafter.

    Contribution calculation methods

    Qualifying Earnings (default): 8% combined of earnings between £6,240 and £50,270. Pensionable Pay (set 1): 9% combined of basic pay only. Pensionable Pay (set 2): 8% combined of pay where pensionable pay = at least 85% of total pay. Pensionable Pay (set 3): 7% combined of total pay where pensionable pay = 100% of total pay. Choose the basis that matches your scheme + pay structure.

    Opt-out window

    Worker has 1 calendar month from enrolment to opt out. If opt-out within window: contributions refunded; worker treated as never enrolled. After window closes: worker can cease active membership but contributions stay in scheme. Employer must re-enrol opted-out workers every 3 years.

    Triennial re-enrolment

    Every 3 years (within 3 months either side of duties start anniversary), employer re-enrols all eligible jobholders who previously opted out. Files re-Declaration of Compliance. Workers can opt out again within 1 month.

    Sole director Ltd Co exemption

    If the Ltd Co has only one director with no employment contract + no other workers, no AE duties apply. Adding a second worker (employee, director, or otherwise) triggers AE duties for the company including (potentially) the director if they meet eligibility criteria with an employment contract.

    Who this applies to + key conditions

    Statute + manual references

    Primary: Pensions Act 2008 — auto-enrolment regime; The Pensions Regulator (TPR) is the statutory enforcement body.

    Related: Occupational and Personal Pension Schemes (Automatic Enrolment) Regulations 2010 (SI 2010/772); Pensions Act 2014 — minimum contribution escalation; Pensions Act 2011 — re-enrolment + thresholds; Automatic Enrolment (Earnings Trigger and Qualifying Earnings Band) Order 2025 — annual review

    HMRC manual: TPR Detailed Guidance for employers (1-11); GovUK AE guidance

    Common mistakes + traps

    Worked example

    Delta Ltd, hires first employee Mark age 35 on £30,000

    Delta Ltd has been a sole-director company. Hires Mark, 35, £30,000 from 1 July 2025. Mark is an eligible jobholder. Delta uses qualifying earnings basis + NEST.

    1. Step 1 — Duties start date: 1 July 2025. Auto-enrol Mark immediately (with 6-week postponement option if needed for admin).
    2. Step 2 — Calculate qualifying earnings: £30,000 − £6,240 lower band = £23,760.
    3. Step 3 — Employer contribution (3%): £23,760 × 3% = £712.80/year = £59.40/month.
    4. Step 4 — Employee contribution (5%): £23,760 × 5% = £1,188/year = £99/month. Tax relief at source via NEST.
    5. Step 5 — Combined 8% goes to Mark's NEST pot monthly.
    6. Step 6 — Declaration of Compliance to TPR within 5 months of duties start (by ~1 December 2025).
    7. Step 7 — Triennial re-enrolment date: ~1 July 2028 (or within 3 months either side).
    8. Note — Delta is now an active employer; the sole-director AE exemption no longer applies; if the director is also a worker with an employment contract, must reassess director too.

    Outcome: Delta meets AE obligations, contributes £712.80/year for Mark, files Declaration of Compliance by 1 December 2025, schedules re-enrolment for 2028.

    How this connects to the rest of the framework

    Becoming an employer + PAYE registration →

    AE duties begin with the duties start date — typically the day the first eligible worker starts.

    RTI mechanics →

    Pension contributions flow through payroll + reduce taxable earnings (relief at source or net pay arrangement).

    Statutory pay (SSP / SMP / SPP / SAP / ShPP / SPBP / SNCP) →

    AE contributions continue during periods of statutory pay (maternity, sick) at standard rates.

    Frequently asked questions

    What happens if I miss the Self Assessment deadline?+
    The Self Assessment deadline is 31 January (online filing) for the previous tax year. Miss it and HMRC apply an automatic £100 penalty. Beyond that: £10 per day from 3 months late (capped at £900), 5% of tax due at 6 months late, and another 5% at 12 months late, under Schedule 55 of the Taxes Management Act 1970. If you have a genuine reason (serious illness, bereavement, technical issue with HMRC's systems) you can appeal with evidence; HMRC accepts reasonable excuse appeals in most genuine cases.
    Do I need an accountant or can I file Self Assessment myself?+
    Legally you can file Self Assessment yourself via gov.uk for free, most simple sole-trader returns (single income source, basic expenses) are realistic to self-file. An accountant adds real value when: your trading profit is above £40,000 (extraction-strategy decisions matter), you have multiple income streams (PAYE + self-employment + property + dividends), you've crossed the £90,000 VAT threshold, you're considering incorporation, or you have an HMRC enquiry. Expect to pay £400-£1,500/year for a typical sole-trader accountant; the cost is itself a deductible expense.
    How do payments on account work?+
    When your Self Assessment tax bill exceeds £1,000 for the first time, HMRC requires payments on account toward NEXT year's tax. Half the current bill is due 31 January (alongside the current bill); the other half is due 31 July. So your first January after crossing the threshold can hit with a double-bill: last year's balance + first payment on account. Adjust via Form SA303 if you expect next year's income to drop substantially. Payments on account don't apply if more than 80% of your tax is collected via PAYE.
    What is the AE earnings trigger?+
    £10,000/year (frozen for 2025/26). Eligible jobholder = aged 22 to SPA + earning over £10,000.
    What are the minimum contributions?+
    3% employer + 5% employee = 8% combined of qualifying earnings (between £6,240 and £50,270 band).
    Is NEST free?+
    Yes — NEST is the government-set-up scheme available free of charge to any UK employer of any size.
    Is a sole-director Ltd Co subject to AE?+
    Generally no — if the only person paid is the sole director with no employment contract + no other workers. Hiring a second worker triggers AE duties.

    Free + regulated-body resources

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