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HMRC internal manual

Employment Income Manual

Amount of pension income charged to tax: accruals basis and pensions paid in advance

Accruals basisSee

EIM74101 for a list of the categories of pension income to which accruals basis applies. See EIM74103 for guidance on dealing with payments of pension arrears.
### Pensions paid in advanceFor pensions paid in advance, the following examples illustrate how entitlement differs from receipt.

Example 1An employee retired on 31 December 2003 and became entitled to a pension payable monthly in advance. The pensioner received four payments between 1 January 2004 and 5 April 2004 but is taxable for 2003/04 on only three of them. Strictly, 5/30 of the payment received on 1 April 2004 is assessable in 2003/04 while the other 25/30 accrues in 2004/05.

Example 2A pensioner is entitled to a pension paid in advance. In the year of death an excessive payment is made. Under the accruals basis only amounts to which the recipient is entitled may be assessed. In consequence, the excess should not be charged to tax, even if the payer does not recover it.