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HMRC internal manual

Employment Income Manual

HM Revenue & Customs
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The meaning of pension and annuity

See EIM74001 for an overview of the income tax charge on pensions.

A pension is a periodical payment made by or on behalf of an employer, usually in recognition of past services. It may be paid either to the person who provided those services or to his or her spouse or any dependant.

A recipient of a pension will usually be entitled to it under his or her contract of employment or under the rules of a pension scheme. Voluntary pensions are also chargeable to tax (see EIM74011).


An annuity is a periodical payment, whether made under an obligation or voluntarily. Part 9 ITEPA 2003 charges certain annuities as pension income (see EIM74007). Other annuities are chargeable as Savings and Investment Income under Part 4 IT(TOI)A 2005 (previously under Case III of Schedule D).