An Additional Voluntary Contribution (AVC) is an extra payment an employee chooses to make into their workplace pension, on top of their standard mandatory contributions. AVCs are deducted from pay before tax, making them a tax-efficient way for employees to boost their retirement savings.
Because AVCs must be treated as pre-tax pension deductions, they need to be set up in a specific place in your payroll platform — not under general deductions. This article explains how to set them up correctly so that contributions are calculated and sent to the pension provider as expected.
Important: AVCs must not be set up under the Deductions section of Pay Run Inclusions. Deductions are post-tax and are not sent to the pension provider. Always use HMRC Adjustments as described below.
Set up a Pension AVC
- Click the Employees menu, then click List.
- Click the name of the employee you want to add the AVC for.
- In the left-hand menu under Pay Run Settings, click Pay Run Inclusions.
- Next to HMRC adjustments, click Add.
- In the Contribution type dropdown, select Employee pension contribution.
- Set the Amount (per pay run). Choose from:
- Fixed — a set amount each pay run (e.g. £50.00)
- Percentage of gross
- Percentage of pensionable earnings
- Percentage of taxable earnings
- Percentage of NIable earnings
- In the Notes field, enter a description that will appear on each pay run — for example: AVC – Additional Voluntary Contribution.
- Set When should this pay run inclusion start? — select Today or choose a specific date.
- Set When should this pay run inclusion expire? — select Never for an ongoing AVC, or choose a specific end date or total amount.
- Click Save.
Once saved, the AVC will appear under HMRC adjustments showing the amount per pay run, the contribution type, and the expiry setting. For example:
£50.00 HMRC adjustment · £50.00 per pay run · Employee Pensions Contribution · Does not expire
Notes: AVC – Additional Voluntary Contribution
The AVC will be included automatically in future pay runs and sent to the pension provider as a pre-tax employee pension contribution.
Common mistake to avoid
The Deductions section in Pay Run Inclusions is for post-tax deductions — money taken from an employee's net pay. Adding an AVC here will deduct the amount from the employee's pay, but it will not be recognised as a pension contribution and will not be sent to the pension provider.
AVCs must be set up under HMRC Adjustments using the Employee pension contribution type to ensure they are:
- Deducted from pay before tax
- Correctly flagged as a pension contribution
- Transmitted to the pension provider
If an AVC has been set up incorrectly under Deductions, remove it from there and re-add it under HMRC Adjustments following the steps above.
Frequently asked questions
HMRC Adjustments is where the payroll platform handles any changes that affect how pay is calculated before tax — including pension contributions. Because AVCs are deducted pre-tax and affect the employee's tax position, this is the correct location for them, even though the contribution goes to a pension provider rather than to HMRC directly.
Yes. When setting the expiry, choose After the following amount has been reached and enter the total amount. The AVC will stop automatically once that threshold is met.
Yes. Go to Employees > List > [Employee name] > Pay Run Inclusions. Under HMRC adjustments, click the pencil icon to edit the AVC or the bin icon to delete it.
No. An AVC is purely an employee's own voluntary contribution. The employer is not required to match it. If the employer does wish to make a corresponding contribution, that would be set up separately as an Employer pension contribution under HMRC Adjustments.