Policy paper
Income Tax: assessing and collecting tax on lump sum death benefits above the allowance
This tax information and impact note is about changes to how Income Tax is charged on certain pension lump sum death benefits paid above the deceased member’s available lump sum and death benefit allowance.
Documents
Details
The measure changes the tax treatment of certain pension lump sum death benefits paid above the deceased member’s available lump sum and death benefit allowance. These amounts will no longer be treated as pension income. HMRC will instead assess and collect a separate Income Tax charge based on the recipient’s marginal rate.
The measure will also make minor and consequential changes to Income Tax rules to preserve Inheritance Tax relief where the same benefit is subject to an Inheritance Tax charge.