(1)A charge to income tax arises where a person becomes entitled to a social security pension lump sum.
(2)For the purposes of the Tax Acts (including subsection (5)) a social security pension lump sum—
(a)is to be treated as income, but
(b)is not to be taken into account in determining the total income of any person.
(3)The person liable to a charge under this section is the person (“P”) entitled to the lump sum, whether or not P is residentF1... or domiciled in the United Kingdom.
(4)The charge is imposed on P for the applicable year of assessment (see subsection (6)).
(5)A charge under this section is a charge in respect of the amount of the lump sum at the following rate—
(a)if P's [F2Step 3 income] for the applicable year of assessment is nil, 0%;
F3(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(c)if P's [F2Step 3 income] for that year of assessment [F4is greater than nil] but does not exceed the basic rate limit for that year, the basic rate [F5or, if P is a Scottish taxpayer, the Scottish basic rate] for that year;
(d)if P's [F2Step 3 income] for that year of assessment exceeds the basic rate limit for that year [F6but does not exceed the higher rate limit for that year], the higher rate [F7or, if P is a Scottish taxpayer, the Scottish higher rate] for that year.
[F8(e)if P's Step 3 income for that year of assessment exceeds the higher rate limit for that year, the additional rate [F9or, if P is a Scottish taxpayer, the Scottish additional rate] for that year.]
(6)Section 8 makes provision as to the meaning of “the applicable year of assessment” for the purposes of this section.
(7)Section 9 contains further definitions and makes provision as to commencement.
(8)Section 10 contains consequential amendments.
[F10(9) For the purposes of this section P's “ Step 3 income ” means P's net income less allowances deducted at Step 3 of the calculation in section 23 of ITA 2007 (calculation of income tax liability). ]
Textual Amendments
F1Words in s. 7(3) omitted (with effect in accordance with Sch. 46 para. 135(2) of the amending Act) by virtue of Finance Act 2013 (c. 29), Sch. 46 para. 135(1)
F2Words in s. 7(5) substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 604(2) (with Sch. 2)
F3S. 7(5)(b) omitted (with effect in accordance with Sch. 1 para. 65 of the amending Act) by virtue of Finance Act 2008 (c. 9), Sch. 1 para. 64(a)
F4Words in s. 7(5)(c) substituted (with effect in accordance with Sch. 1 para. 65 of the amending Act) by Finance Act 2008 (c. 9), Sch. 1 para. 64(b)
F5Words in s. 7(5)(c) inserted (with effect in accordance with art. 1(2) of the amending S.I.) by The Scottish Rate of Income Tax (Consequential Amendments) Order 2015 (S.I. 2015/1810), arts. 1(1), 13(a)
F6Words in s. 7(5)(d) inserted (with effect in accordance with Sch. 2 para. 25 of the amending Act) by Finance Act 2009 (c. 10), Sch. 2 para. 24(a)
F7Words in s. 7(5)(d) inserted (with effect in accordance with art. 1(2) of the amending S.I.) by The Scottish Rate of Income Tax (Consequential Amendments) Order 2015 (S.I. 2015/1810), arts. 1(1), 13(b)
F8S. 7(5)(e) inserted (with effect in accordance with Sch. 2 para. 25 of the amending Act) by Finance Act 2009 (c. 10), Sch. 2 para. 24(b)
F9Words in s. 7(5)(e) inserted (with effect in accordance with art. 1(2) of the amending S.I.) by The Scottish Rate of Income Tax (Consequential Amendments) Order 2015 (S.I. 2015/1810), arts. 1(1), 13(c)
F10S. 7(9) inserted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 604(3) (with Sch. 2)