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HMRC internal manual

Pensions Tax Manual

General principles: overview of pensions taxation: taxation of authorised and unauthorised payments


Glossary  PTM000001


A payment that a registered pension scheme makes will be either:

  • an authorised payment, or
  • an unauthorised payment.

Any application for HMRC to register a pension scheme must include a declaration by the scheme administrator confirming that the instruments or agreements by which the scheme is constituted do not entitle any person to unauthorised payments (Section 153(2) and (3) Finance Act 2004).

Authorised payments
Unauthorised payments

Authorised payments

Sections 160(1) and (3), 164 and 175 Finance Act 2004

Authorised payments are defined in Part 4 of Finance Act 2004 and they fall into two categories:

  • authorised member payments, and
  • authorised employer payments.

Most authorised payments are taxable although some may be tax-free. Further information can be found at PTM140000.

Unauthorised payments

Section 160(2) & (4) Finance Act 2004

An unauthorised payment is any payment which does not fall within the definition of an authorised payment. Again, there are two categories:

  • unauthorised member payments, and
  • unauthorised employer payments.

Unauthorised payments trigger an income tax charge at a rate of 40 per cent - the unauthorised payments charge. A further income tax charge of 15 per cent - the unauthorised payments surcharge - will be due if the amount of unauthorised payments go above a set limit. The person liable to the tax charge(s) is the member (for unauthorised member payments) or employer (for unauthorised employer payments). Where an unauthorised member payment is made after the member’s death, the recipient of the payment is liable to the tax charge or charges.

The scheme administrator is also liable to a scheme sanction tax charge of up to 40% in respect of most unauthorised payments.

Further information on unauthorised payments can be found at PTM130000.