The charge to tax on pension income under this Part is a charge to tax on that income excluding any exempt income.

“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.

“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.

These are the provisions referred to in subsection (2)—

The amount of pension income which is charged to tax under this Part for a particular tax year is as follows.

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.

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

The deductions allowed from a pension, annuity or other item of pension income are those under—

A deduction is allowed from amount TPI.

The amount of the deduction allowed is the amount (“amount EI”) which counted as employment income of A under Chapter 2 of Part 7A in relation to the relevant step (see section 554Z2(1)).

If amount EI exceeds amount TPI, the excess is to be carried forward to future tax years to be deducted under this section (when applicable) until all of amount EI has been deducted.

Subsection (6) applies if it is determined on a just and reasonable basis that the relevant rights represent, or have arisen or derived from, only part of the sum of money or asset which was the subject of the relevant step.

In subsection (3) the reference to the amount which counted as employment income is to be read as a reference to the corresponding proportion of that amount.

This section applies to any pension paid by or on behalf of a person who is in the United Kingdom.

But this section does not apply to a pension if any provision of Chapters 5 to 14 of this Part applies to it.

For pensions paid by or on behalf of a person who is outside the United Kingdom, see Chapter 4 of this Part.

This section applies if an individual is temporarily non-resident.

Any pension within subsection (3) is to be treated for the purposes of section 571 as if it accrued in the period of return.

Subsection (3)(d)(i) includes a case where the charge could be prevented by making a DTR claim, even if no claim is in fact made.

Nothing in any double taxation relief arrangements is to be read as preventing the individual from being chargeable to income tax in respect of any pension treated by virtue of this section as accruing in the period of return (or as preventing a charge to that tax from arising as a result).

In this section—

• “double taxation relief arrangements” means arrangements that have effect under section 2(1) of TIOPA 2010;

• “DTR claim” means a claim for relief under section 6 of that Act.

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.

But this section does not apply to a pension if any provision of Chapters 5 to 14 of this Part applies to it.

This section does not apply to pension within section 574(1)(bb) if the pension is paid in respect of a deceased individual who had not reached the age of 75 at the date of death.

Subsection (2A) is subject to subsection (2D).

Chapter 17 of this Part provides exemptions for certain annuities (see sections 646D and 646E: certain beneficiaries' annuities purchased out of unused or drawdown funds).

See also paragraph 45A of Schedule 36 to FA 2004 (exemption in certain cases for payments on or after 6 April 2015 to beneficiaries under joint-life or similar annuities purchased before 6 April 2006).

For pensions paid by or on behalf of a person who is in the United Kingdom, see Chapter 3 of this Part.

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;

• “overseas pension scheme” has the same meaning as in Part 4 of FA 2004 (see section 150(7) of that Act);

• “relevant non-UK scheme” is to be read in accordance with paragraph 1(5) of Schedule 34 to FA 2004.

If section 573 applies, the taxable pension income for a tax year is F8the full amount of the pension income arising in the tax year, but subject to subsections F73(1A), (2) and (3) F68and section 576A.

If the person liable for the tax under this Part is an individual and the tax year is a split year as respects that individual, the taxable pension income for the tax year is the full amount of the pension income arising in the UK part of the year, subject to subsections (2) and (3) and section 576A.

The full amount of the pension income arising in the tax year F74or, as the case may be, the UK part of the tax year is to be calculated on the basis that the pension is 90% of its actual amount, unless as a result of subsection (3) the pension income is charged in accordance with section 832 of ITTOIA 2005 (relevant foreign income charged on the remittance basis).

That pension income is treated as relevant foreign income for the purposes of Chapters 2 and 3 of Part 8 of that Act (relevant foreign income: remittance basis and deductions and reliefs).

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

See also Chapter 4 of that Part (unremittable income).

This section applies if a person is temporarily non-resident.

For the purpose of determining whether the figure specified in subsection (2) is exceeded, any relevant withdrawal paid in a currency other than sterling is to be translated into sterling using the average exchange rate for the year ending with 31 March in the tax year in which the relevant withdrawal is paid.

If section 809B, 809D or 809E of ITA 2007 (remittance basis) applies to the person for the year of return, any relevant withdrawal within subsection (3) that was remitted to the United Kingdom in the temporary period of non-residence is to be treated as remitted to the United Kingdom in the period of return.

Nothing in any double taxation relief arrangements is to be read as preventing the person from being chargeable to income tax in respect of any relevant withdrawal treated by virtue of this section as arising in the period of return (or as preventing a charge to that tax from arising as a result).

In this section—

• “double taxation relief arrangements” means arrangements that have effect under section 2(1) of TIOPA 2010;

• “DTR claim” means a claim for relief under section 6 of that Act;

• F102“member's flexi-access drawdown fund” and “dependant's flexi-access drawdown fund” have the same meaning as in Part 4 of FA 2004 (see paragraphs 8A and 22A of Schedule 28 to FA 2004);

• “remitted to the United Kingdom” has the same meaning as in Chapter A1 of Part 14 of ITA 2007;

• F103“scheme pension” means a scheme pension within the meaning of paragraph 2 of Schedule 28 to FA 2004 or a dependants' scheme pension within the meaning of paragraphs 16 to 16C of that Schedule;

• “the year of return” means the tax year that consists of or includes the period of return.

The following expressions have the meaning given in Schedule 34 to FA 2004—

• “relevant non-UK scheme” (see paragraph 1(5));

• “relieved member” (see paragraph 1(7));

• “transfer member” (see paragraph 1(8));

• “member's UK tax-relieved fund” (see paragraph 3(2));

• “member's relevant transfer fund” (see paragraph 4(2)).

This section applies to—

But this section does not apply to any social security pension lump sum (within the meaning of section 7 of F(No.2)A 2005).

In this section—

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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).

This section applies to any pension under a registered pension scheme (but subject to subsection (2) F92and section 579CZA ).

This section does not apply to a pension under a registered pension scheme if and to the extent that, when it is paid, a liability to the unauthorised payments charge arises in respect of the amount of the payment (see section 208 of FA 2004).

Chapter 17 of this Part provides exemptions for certain annuities (see sections 646B and 646C: certain beneficiaries' annuities purchased out of unused or drawdown funds).

Subsection (1) is subject to the following provisions of this section.

In this section—

• “dependant”, “nominee” and “successor” have the meaning given (respectively) by paragraphs 15, 27A and 27F of Schedule 28 to FA 2004,

• “dependant's drawdown pension fund”, “dependant's flexi-access drawdown fund”, “nominee's flexi-access drawdown fund” and “successor's flexi-access drawdown fund” have the meaning given (respectively) by paragraphs 22, 22A, 27E and 27K of Schedule 28 to FA 2004,

• “money purchase arrangement” has the meaning given by section 152 of FA 2004, and

• “the relevant two-year period”, in relation to relevant unused uncrystallised funds held for the purposes of a money purchase arrangement relating to a deceased individual under a registered pension scheme, means the period of two years beginning with the earlier of the day on which the scheme administrator of the scheme first knew of the individual's death and the day on which the scheme administrator could first reasonably have been expected to have known of it.

Paragraph 27E(4) and (5) of Schedule 28 to FA 2004 (meaning of “unused uncrystallised funds”) apply for the purposes of subsection (8)(a).

This section applies if a person is temporarily non-resident.

For the purpose of determining whether the figure specified in subsection (2) is exceeded, any relevant withdrawal paid in a currency other than sterling is to be translated into sterling using the average exchange rate for the year ending with 31 March in the tax year in which the relevant withdrawal is paid.

Nothing in any double taxation relief arrangements is to be read as preventing the person from being chargeable to income tax in respect of any relevant withdrawal treated by virtue of this section as accruing in the period of return (or as preventing a charge to that tax from arising as a result).

In this section—

• “double taxation relief arrangements” means arrangements that have effect under section 2(1) of TIOPA 2010;

• “DTR claim” means a claim for relief under section 6 of that Act;

• F106“dependants' annuity”, “dependant's flexi-access drawdown fund”, “dependants' scheme pension”, “dependants' short-term annuity”, “lifetime annuity”, “member's flexi-access drawdown fund”, “money purchase arrangement”, “nominee's flexi-access drawdown fund”, “scheme pension”, “short-term annuity”, “successor's flexi-access drawdown fund” and “uncrystallised funds pension lump sum” have the same meaning as in Part 4 of FA 2004 (see section 152 of FA 2004 and paragraphs 2, 3, 6, 8A, 16 to 16C, 17, 20, 22A, 27E and 27K of Schedule 28, and paragraph 4A of Schedule 29, to FA 2004).

But this section applies to an annuity which arises from a source outside the United Kingdom only if it is paid to a person resident in the United Kingdom.

In subsection (3)(a) “earnings” has the meaning given by section 62.

But this section applies to an annuity which arises from a source outside the United Kingdom only if it is paid to a person resident in the United Kingdom.

This section does not apply to an annuity to which F33Chapter 5A of this Part applies.

In this section “occupational pension scheme” has the same meaning as in Part 4 of FA 2004 (see section 150(5) of that Act).

This section applies to any annuity purchased by any person in recognition of another person’s services in any office or employment.

But this section applies to an annuity which arises from a source outside the United Kingdom only if it is paid to a person resident in the United Kingdom.

This section does not apply to an annuity to which F49Chapter 5A of this Part applies.

For the purposes of 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.

Chapter 17 of this Part provides exemptions for certain annuities (see sections 646B to 646E: certain beneficiaries' annuities purchased out of unused or drawdown funds).

See also paragraph 45A of Schedule 36 to FA 2004 (exemption in certain cases for payments on or after 6 April 2015 to beneficiaries under joint-life or similar annuities purchased before 6 April 2006).

The taxable pension income for an annuity to which section 609, 610 or 611 applies is determined in accordance with this section if the annuity arises from a source in the United Kingdom.

The taxable pension income for a tax year is the full amount of the annuity arising in that year.

The taxable pension income for an annuity to which section 609, 610 or 611 applies is determined in accordance with this section if the annuity arises from a source outside the United Kingdom.

The taxable pension income for a tax year is F10the full amount of the annuity arising in the tax year, but subject to subsections (3) and (4).

The full amount of the annuity arising in the tax year is to be calculated on the basis that the annuity is 90% of its actual amount, unless as a result of subsection (4) the annuity is charged in accordance with section 832 of ITTOIA 2005 (relevant foreign income charged on the remittance basis).

The annuity is treated as relevant foreign income for the purposes of Chapters 2 and 3 of Part 8 of that Act (relevant foreign income: remittance basis and deductions and reliefs).

But if the annuity arises in the Republic of Ireland, section 839 of that Act (annual payments payable out of relevant foreign income) applies with the omission of condition B and subsection (5)(a).

See also Chapter 4 of that Part (unremittable income).

This section applies to a pension if conditions A, B and C are met.

But condition C is not met if the pension is payable out of the public revenue of the United Kingdom or Northern Ireland.

In this Chapter “pension” includes a pension which is paid voluntarily or is capable of being discontinued.

But this section does not apply to a part of a pension which is paid because the Pensions (Increase) Act 1971 (c. 56) applies to it (and accordingly section 569 applies to that part of the pension).

Chapter 18 of this Part provides an exemption where a pension to which this section applies is paid to a person who is not resident in the United Kingdom (see sections 647 and 651).

If section 629 applies, the taxable pension income for a tax year is F12the full amount of the pension income arising in the tax year .

The full amount of the pension income arising in the tax year is to be calculated on the basis that the pension is 90% of its actual amount.

The pension income is treated as relevant foreign income for the purposes of section 838 of that Act (expenses attributable to collection or payment of relevant foreign income).

But this section applies to a payment which is paid by or on a behalf of a person who is outside the United Kingdom only if it is paid to a person resident in the United Kingdom.

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.

The taxable pension income for payments to which section 633 applies is determined in accordance with this section if the payments are made by or on behalf of a person who is in the United Kingdom.

The taxable pension income for a tax year is the full amount of the payments accruing in that year irrespective of when any amount is actually paid.

The taxable pension income for payments to which section 633 applies is determined in accordance with this section if the payments are made by or on behalf of a person who is outside the United Kingdom.

The taxable pension income for a tax year is F14the full amount of the pension income arising in the tax year, but subject to subsections (3) and (4) .

The full amount of the pension income arising in the tax year is to be calculated on the basis that the pension is 90% of its actual amount, unless as a result of subsection (4) the pension income is charged in accordance with section 832 of ITTOIA 2005 (relevant foreign income charged on the remittance basis).

That pension income is treated as relevant foreign income for the purposes of Chapters 2 and 3 of Part 8 of that Act (relevant foreign income: remittance basis and deductions and reliefs).

But if that pension income arises in the Republic of Ireland, section 839 of that Act (annual payments payable out of relevant foreign income) applies with the omission of condition B and subsection (5)(a).

See also Chapter 4 of that Part (unremittable income).

For the purposes of subsection (1B), the amount of the member's available lifetime allowance when the sum is paid is what it is for the purposes of Part 4 of FA 2004 (see section 219 of FA 2004), but adjusted in accordance with the rules in paragraphs (a) and (b) of paragraph 12(1A) of Schedule 29 to FA 2004.

But F83subsections (1) to (1B) do not limit the operation of sections 214 to 226 of FA 2004 (lifetime allowance charge).

A short service refund lump sum under a registered pension scheme is subject to income tax in accordance with section 205 of FA 2004 (charge to tax on scheme administrator in respect of such a lump sum) but not otherwise.

A serious ill-health lump sum which is paid under a registered pension scheme to a member who has reached the age of 75 is subject to income tax in accordance with section 205A of FA 2004 (charge to tax on scheme administrator in respect of such a lump sum) but not otherwise.

In the case of a registered pension scheme which is a split scheme for the purposes of the Registered Pensions Schemes (Splitting of Schemes) Regulations 2006, subsections (3) and (4) shall have effect as if the references to the scheme administrator were to the sub-scheme administrator (within the meaning of those Regulations).

A lifetime allowance excess lump sum is chargeable to income tax in accordance with sections 214 to 226 of FA 2004 (lifetime allowance charge) but not otherwise.

In this section—

In this section—

• “annuity protection lump sum death benefit”,

• “defined benefits lump sum death benefit”,

• F59“drawdown pension fund lump sum death benefit”,

• F82“ flexi-access drawdown fund lump sum death benefit ”,

• “pension protection lump sum death benefit”, F60and

• F54...

• “uncrystallised funds lump sum death benefit”, F61...

• F61...

• have the same meaning as in section 168 of FA 2004 (see Part 2 of Schedule 29 to that Act).

The following are the lump sums mentioned in section 636A(4) and (4ZA).

An annuity protection lump sum death benefit, or a pension protection lump sum death benefit, paid in respect of a member of the scheme who had reached the age of 75 at the date of the member's death.

In this section—

• “dependant”, “nominee” and “successor” have the meaning given, respectively, by paragraphs 15, 27A and 27F of Schedule 28 to FA 2004, and

• “relevant 2-year period”, in relation to a death, means the period of 2 years beginning with the earlier of—

  1. a

     the day on which the scheme administrator of the scheme mentioned in section 636A(4) or (4ZA) (as the case may be) first knew of the death, and

  2. b

     the day on which that scheme administrator could first reasonably have been expected to have known of it.

Section 636A(4A) and (7) (interpretation) apply also for the purposes of this section.

The member is to be treated as having taxable pension income for the tax year in which the payment is made equal to the amount of the lump sum.

In this section—

The person is to be treated as having taxable pension income for the tax year in which the payment is made equal to the amount of the lump sum.

In this section—

No liability to income tax arises on a pension or annuity if it is paid to the holder of an award for bravery in respect of the award.

In this section “award for bravery” means—

The instruments referred to in subsection (1)(a) are—

• Defence (Local Defence Volunteers) Regulations 1940 (S.R. & O. 1940/748),

• War Pensions (Coastguards) Scheme 1944 (S.R. & O. 1944/500),

• War Pensions (Naval Auxiliary Personnel) Scheme 1964 (S.I. 1964/1985),

• Pensions (Polish Forces) Scheme 1964 (S.I. 1964/2007),

• War Pensions (Mercantile Marine) Scheme 1964 (S.I. 1964/2058),

• Order by Her Majesty concerning pensions and other grants in respect of disablement or death due to service in the Home Guard (1964 Cmnd. 2563),

• Order by Her Majesty concerning pensions and other grants in respect of disablement or death due to service in the Home Guard after 27th April 1952 (1964 Cmnd. 2564),

• Order by Her Majesty concerning pensions and other grants in respect of disablement or death due to service in the Ulster Defence Regiment (1971 Cmnd. 4567),

• Personal Injuries (Civilians) Scheme 1983 (S.I. 1983/686),

• Naval, Military and Air Forces etc. (Disablement and Death) Service Pensions Order 1983 (S.I. 1983/883).

The Treasury may by order amend subsection (2).

In such a case, an amount of pension B equal to the withheld amount of pension A is treated for the purposes of section 639 as part of pension A.

But if the Secretary of State certifies that a pension or retired pay of a kind listed in subsection (1) is only partly attributable to disablement or disability, that subsection applies only to the part attributable to disablement or disability.

Condition B is that the pension is now paid under section 1 of OPA 1973 (whether or not it is paid out of a fund established under a scheme made under that section).

Condition C is that, at the time the pension is paid, provision is made by double taxation relief arrangements which would exempt the pension from income tax in the United Kingdom if the pension were still paid by the relevant government (rather than under section 1 of OPA 1973).

Subsection (1) does not apply to any part of a pension which is paid because the Pensions (Increase) Act 1971 (c. 56) applies to it.

In this section—

No liability to income tax arises on the exempt amount of a disablement pension.

For the purposes of 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.

Condition B is that the payments are attributable on a just and reasonable basis to the payments or contributions in respect of premiums.

No liability to income tax arises on a part of a social security pension which is attributable to an increase in respect of a child.

That condition is that the amount of coal or fuel provided or in respect of which the allowance is paid does not substantially exceed the amount reasonably required for personal use.

That condition is assumed to be met unless the contrary is shown.

Condition B is that the officer or employee is not engaged in any trade, profession, vocation or employment in the United Kingdom, otherwise than as a consular officer or employee of the state in question.

In this section—

• “consular officer or employee” includes any person employed for the purposes of the official business of a consular officer at—

  1. a

     any consulate,

  2. b

     any consular establishment, or

  3. c

     any other premises used for those purposes,

• “foreign pension income” means—

  1. a

     income to which section 573 or 629 applies, and

  2. b

     income arising from a source outside the United Kingdom to which section 609, 610, 611 or 633 applies; and

• “reciprocal agreement” has the same meaning as in section 302.

Section 302(5) to (7) apply to an Order under subsection (1) and the operation of this section as they apply to an Order under section 302(1) and the operation of section 302.

Paragraph 27E(3) to (5) of Schedule 28 to FA 2004 (meaning of “unused drawdown funds” and “unused uncrystallised funds”) apply for the purposes of subsection (1).

Paragraph 27FA(2) of Schedule 28 to FA 2004 (meaning of “undrawn funds”) applies for the purposes of subsection (2)(e).

For the purposes of subsection (3)(c), a dependants' annuity or nominees' annuity is purchased together with a lifetime annuity if the dependants' annuity or nominees' annuity (as the case may be) is related to the lifetime annuity, and paragraph 3(4A) and (4B) of Schedule 29 to FA 2004 (meaning of “related”) apply for the purposes of this subsection.

For the purposes of this section, a person becomes entitled to an annuity when the person first acquires an actual (rather than a prospective right) to receive the annuity.

Subsection (1) is subject to subsections (4) to (6).