Office of Public Sector Information
The structure of this Part is as follows—
Chapter 2—
imposes the charge to tax on pension income, and
provides for deductions to be made from the amount of income chargeable;
Chapters 3 to 15 set out the types of income which are charged to tax under this Part and, for each type of income, identify—
the amount of income chargeable to tax for a tax year, and
the person liable to pay any tax charged;
Chapters 16 to 18 deal with exemptions from the charge to tax (whether under this Part or any other provision).
(1) The charge to tax on pension income under this Part is a charge to tax on that income excluding any exempt income.
(2) “Pension income” means the pensions, annuities and income of other types to which the provisions listed in subsection (4) apply.
This definition applies for the purposes of the Tax Acts.
(3) “Exempt income” means pension income on which no liability to income tax arises as a result of any provision of Chapters 16 to 18 of this Part.
This definition applies for the purposes of this Part.
(4) These are the provisions referred to in subsection (2)—
| Provision | Income | Chapter (of this Part) |
|---|---|---|
| Section 569 | United Kingdom pensions | Chapter 3 |
| Section 573 | Foreign pensions | Chapter 4 |
| Section 577 | United Kingdom social security pensions | Chapter 5 |
| Section 580 | Pensions or annuities from approved retirement benefits schemes | Chapter 6 |
| Section 583 | Unauthorised payments from— (a)
approved retirement benefits schemes, or (b)
former approved superannuation funds (see section 593) |
Chapter 6 |
| Section 590 | Annuities paid under former approved superannuation funds | Chapter 7 |
| Section 595 | Annuities from approved personal pension schemes | Chapter 8 |
| Section 598 | Income withdrawals under approved personal pension arrangements | Chapter 8 |
| Section 601 | Unauthorised personal pension payments | Chapter 8 |
| Section 605 | Annuities under retirement annuity contracts | Chapter 9 |
| Section 609 | Annuities for the benefit of dependants | Chapter 10 |
| Section 610 | Annuities under sponsored superannuation schemes | Chapter 10 |
| Section 611 | Annuities in recognition of another’s services | Chapter 10 |
| Section 615 | Certain overseas government pensions paid in the United Kingdom | Chapter 11 |
| Section 619 | The House of Commons Members' Fund | Chapter 12 |
| Section 623 | Return of surplus employee additional voluntary contributions | Chapter 13 |
| Section 629 | Pre-1973 pensions paid under OPA 1973 | Chapter 14 |
| Section 633 | Voluntary annual payments | Chapter 15 |
(1) The amount of pension income which is charged to tax under this Part for a particular tax year is as follows.
(2) In relation to each pension, annuity or other item of pension income, the amount charged to tax is the “net taxable pension income” for the tax year.
(3) The net taxable pension income for a pension, annuity or other item of pension income for a tax year is given by the formula—
TPI - DPI
where—
TPI means the amount of taxable pension income for that pension, annuity or item of pension income for that year (see subsection (4)), and
DPI means the total amount of any deductions allowed from the pension, annuity or item of pension income (see subsection (5)).
(4) For the purposes of this Act—
(a) the amount of taxable pension income for a pension, annuity or other item of pension income for a tax year is determined in accordance with Chapters 3 to 15 of this Part (which contain provisions relating to this amount for each type of pension income); and
(b) in determining the amount of taxable pension income for a pension, annuity or other item of pension income, any exempt income is to be excluded.
(5) The deductions allowed from a pension, annuity or other item of pension income are those under—
section 617 (10% deduction from an overseas government pension to which section 615 applies);
Part 12 (payroll giving).
For the provision identifying which person is liable for any tax charged under this Part on a pension, annuity or other item of pension income, see Chapters 3 to 15.
(1) This section applies to any pension paid by or on behalf of a person who is in the United Kingdom.
(2) But this section does not apply to a pension if any provision of Chapters 5 to 14 of this Part applies to it.
(3) For pensions paid by or on behalf of a person who is outside the United Kingdom, see Chapter 4 of this Part.
In this Chapter “pension” includes a pension which is paid voluntarily or is capable of being discontinued.
If section 569 applies, the taxable pension income for a tax year is the full amount of the pension accruing in that year irrespective of when any amount is actually paid.
If section 569 applies, the person liable for any tax charged under this Part is the person receiving or entitled to the pension.
(1) This section applies to any pension paid by or on behalf of a person who is outside the United Kingdom to a person who is resident in the United Kingdom.
(2) But this section does not apply to a pension if any provision of Chapters 5 to 14 of this Part applies to it.
(3) For pensions paid by or on behalf of a person who is in the United Kingdom, see Chapter 3 of this Part.
(1) For the purposes of this Chapter “pension” includes a pension which is paid voluntarily, or is capable of being discontinued, if conditions A and B are met.
(2) Condition A is that the pension is paid to—
(a) a former employee or a former office-holder,
(b) the widow or widower of a former employee or a former office-holder, or
(c) any child, relative or dependant of a former employee or a former office-holder.
(3) Condition B is that the pension is paid by or on behalf of—
(a) the person—
(i) who employed the former employee, or
(ii) under whom the former office-holder held the office, or
(b) the successors of that person.
(4) In this section “office” includes in particular any position which has an existence independent of the person who holds it and may be filled by successive holders.
(1) If section 573 applies, the taxable pension income for a tax year is the amount on which tax would be chargeable if the pension were charged to tax under Case V of Schedule D for that year (see in particular the provisions of ICTA listed in subsection (2)).
(2) Those provisions of ICTA are—
(a) sections 65 and 68 (calculation of the amount of the income on which tax is to be charged in the tax year);
(b) section 584 (relief for unremittable overseas income);
(c) section 585 (relief on delayed remittances).
If section 573 applies, the person liable for any tax charged under this Part is the person receiving or entitled to the pension.
(1) This section applies to—
the state pension,
graduated retirement benefit,
industrial death benefit,
widowed mother’s allowance,
widowed parent’s allowance, and
widow’s pension.
(2) In this section—
“state pension” means any pension payable under—
section 44, 48A, 48B, 48BB, 51 or 78 of SSCBA 1992, or
section 44, 48, 48B, 48BB, 51 or 78 of SSCB(NI)A 1992;
“graduated retirement benefit” means any benefit payable under—
section 36 or 37 of the National Insurance Act 1965 (c. 51), or
section 35 or 36 of the National Insurance Act (Northern Ireland) 1966 (c. 6 (N.I.));
“industrial death benefit” means any benefit payable under—
section 94 of, and Part 6 of Schedule 7 to, SSCBA 1992, or
section 94 of, and Part 6 of Schedule 7 to, SSCB(NI)A 1992;
“widowed mother’s allowance” means any allowance payable under—
section 37 of SSCBA 1992, or
section 37 of SSCB(NI)A 1992;
“widowed parent’s allowance” means any allowance payable under—
section 39A of SSCBA 1992, or
section 39A of SSCB(NI)A 1992;
“widow’s pension” means any pension payable under—
section 38 of SSCBA 1992, or
section 38 of SSCB(NI)A 1992.
(3) In subsection (2), in paragraph (b) of the definition of state pension, the reference to section 48 of SSCB(NI)A 1992 is a reference to the section 48 inserted by paragraph 3(1) of Schedule 2 to the Pensions (Northern Ireland) Order 1995 (S.I. 1995/3213 (N.I. 22)).
(4) Chapter 17 of this Part provides a partial exemption for a pension to which this section applies in respect of any part of the pension which is attributable to an increase in respect of a child (see section 645).
If section 577 applies, the taxable pension income for a tax year is the full amount of the pension, benefit or allowance accruing in that year irrespective of when any amount is actually paid.
If section 577 applies, the person liable for any tax charged under this Part is the person receiving or entitled to the pension, benefit or allowance.
This section applies to—
(a) any pension or annuity paid under a retirement benefits scheme which is either approved or being considered for approval, and
(b) any annuity acquired using funds held for the purposes of a retirement benefits scheme which is either approved or being considered for approval.
If section 580 applies, the taxable pension income for a tax year is the full amount of the pension or annuity accruing in that year irrespective of when any amount is actually paid.
If section 580 applies, the person liable for any tax charged under this Part is the person receiving or entitled to the pension or annuity.
(1) This section applies to a payment if conditions A, B and C are met.
(2) But this section does not apply to a payment to which section 623 applies.
(3) Condition A is that the payment—
(a) is made out of funds which are held for the purposes of an approved retirement benefits scheme (“the paying scheme”), but
(b) is not expressly authorised—
(i) by the rules of the paying scheme, or
(ii) by virtue of paragraph 33 of Schedule 6 to FA 1989.
(4) Condition B is that the payment is not made in the course of payment of a pension or annuity.
(5) Condition C is that the payment is made to or for the benefit of—
(a) an employee, or
(b) an ex-spouse of an employee.
(6) A payment to which this section applies is not to be charged to tax under—
(a) section 598 or 599 of ICTA, or
(b) the Regulations mentioned in paragraph 8 of Schedule 3 to FA 1971.
(7) In this section “payment” includes—
(a) a transfer of assets, and
(b) any other transfer of money’s worth.
If section 583 applies, the taxable pension income for a tax year is the total amount or value of the payments made in that year.
If section 583 applies, the person liable for any tax charged under this Part is the person mentioned in condition C in section 583(5) to whom, or for whose benefit, the payment is made.
(1) In this Chapter—
“retirement benefits scheme” has the meaning given in section 611 of ICTA;
“approved”, in relation to such a scheme, means that the scheme is approved by the Board of Inland Revenue for the purposes of—
Chapter 2 of Part 2 of FA 1970, or
Chapter 1 of Part 14 of ICTA.
(2) Any reference in this Chapter to a pension or annuity paid under a retirement benefits scheme includes a reference to a pension or annuity paid under a contract which—
(a) is made for purposes of the scheme, and
(b) is made between—
(i) the administrator of the scheme,
(ii) the employer, or
(iii) the employee or an ex-spouse of the employee,
and a third party.
(3) In subsection (2) the reference to the employer is a reference to the person who is the employer in relation to the scheme.
(4) In subsection (2)(b)(i) “administrator of the scheme” is to be construed in accordance with section 611AA of ICTA.
(5) References in this Chapter to approved retirement benefits schemes are extended by section 587 (marine pilots' benefit fund).
(1) In this Chapter the expression “approved retirement benefits scheme” includes a marine pilots' benefit fund which is approved by the Board of Inland Revenue under section 607 of ICTA for the purposes of Chapter 1 of Part 14 of ICTA.
(2) In any case where the paying scheme for the purposes of section 583(3) is a pilots' benefit fund, the references in section 583(5) to an employee are to be read as references to a member or former member of the fund.
(3) In this section “marine pilots' benefit fund” means—
(a) a fund established under section 15(1)(i) of the Pilotage Act 1983 (c. 21), or
(b) any scheme supplementing or replacing any such fund.
(1) In this Chapter—
“employee”—
includes a person who is to be, or has been, an employee, and
in relation to a company, includes any officer or director of the company and any other person taking part in the management of the affairs of the company;
“ex-spouse” means a party to a marriage which has been dissolved or annulled and, in relation to any person, means the other party to a marriage with that person which has been dissolved or annulled.
(2) For the purposes of the definition of “employee” in subsection (1), “director”, in relation to a company, includes—
(a) in the case of a company the affairs of which are managed by a board of directors or similar body, a member of that board or body,
(b) in the case of a company the affairs of which are managed by a single director or similar person, that person,
(c) in the case of a company the affairs of which are managed by the members themselves, a member of that company,
and includes a person who is to be or has been a director.
The Board of Inland Revenue may make regulations generally for the purpose of carrying the preceding provisions of this Chapter into effect.
This section applies to—
(a) any annuity paid under a former approved superannuation fund, and
(b) any annuity acquired using funds held for the purposes of a former approved superannuation fund.
If section 590 applies, the taxable pension income for a tax year is the full amount of the annuity paid in that year.
If section 590 applies, the person liable for any tax charged under this Part is the person receiving or entitled to the annuity.
(1) Section 583 applies to a payment if—
(a) the payment is made out of funds which are held for the purposes of a former approved superannuation fund (“the paying fund”), but
(b) it is not expressly authorised—
(i) by the rules of the paying fund, or
(ii) by virtue of paragraph 33 of Schedule 6 to FA 1989, and
(c) conditions B and C in section 583(4) and (5) are met.
(2) But section 583 does not apply to a payment to which section 623 applies.
(3) In this section “payment” includes—
(a) a transfer of assets, and
(b) any other transfer of money’s worth.
(4) If section 583 applies to a payment by virtue of this section, sections 584, 585 and 588 apply accordingly.
(1) In this Chapter “former approved superannuation fund” means any fund which immediately before 6th April 1980 was an approved superannuation fund for the purposes of section 208 of ICTA 1970.
(2) But a fund is not a former approved superannuation fund if any of the following things has happened since 5th April 1980—
(a) the fund has been approved by the Board of Inland Revenue for the purposes of Chapter 2 of Part 2 of FA 1970,
(b) the fund has been approved by the Board for the purposes of Chapter 1 of Part 14 of ICTA, or
(c) any sum has been paid to the fund by way of contribution.
This section applies to any annuity acquired using funds held for the purposes of an approved personal pension scheme.
If section 595 applies, the taxable pension income for a tax year is the full amount of the annuity received in that year.
If section 595 applies, the person liable for any tax charged under this Part is the person receiving or entitled to the annuity.
This section applies to any income withdrawal under approved personal pension arrangements.
If section 598 applies, the taxable pension income for a tax year is the total amount of the income withdrawals made in that year.
If section 598 applies, the person liable for any tax charged under this Part is the person receiving or entitled to the income.
(1) This section applies to any unauthorised personal pension payment.
(2) In this section “personal pension payment” means a payment which—
(a) is made out of funds which are or have been held for the purposes of a personal pension scheme (“the paying scheme”), and
(b) is made to or for the benefit of an individual who has made personal pension arrangements in accordance with the paying scheme (“the individual’s arrangements”).
(3) For the purposes of this section a personal pension payment is unauthorised if any of conditions A, B and C are met.
(4) Condition A is that—
(a) the paying scheme and the individual’s arrangements are both approved at the time the payment is made, but
(b) the payment is not expressly authorised by the rules of the paying scheme.
(5) Condition B is that—
(a) the paying scheme is not approved at the time the payment is made, and
(b) at the time the scheme was last approved, the payment would not have been expressly authorised under the scheme’s rules.
(6) Condition C is that—
(a) the individual’s arrangements are not approved at the time the payment is made, and
(b) at the time the arrangements were last approved, the payment would not have been expressly authorised under the arrangements.
(7) In this section “payment” includes—
(a) a transfer of assets, and
(b) any other transfer of money’s worth.
If section 601 applies, the taxable pension income for a tax year is the total amount or value of the payments made in that year.
If section 601 applies, the person liable for any tax charged under this Part is the individual who made the arrangements mentioned in section 601(2)(b) to whom or for whose benefit the payment is made, whether or not the individual is the recipient of the payment.
In this Chapter the following expressions have the same meaning as in Chapter 4 of Part 14 of ICTA (see section 630(1) of ICTA)—
(a) “approved”;
(b) “income withdrawal”;
(c) “personal pension arrangements”;
(d) “personal pension scheme”.
This section applies to any annuity paid under a retirement annuity contract.
Income Tax (Earnings and Pensions) Act 2003