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From 2007 a tax charge may arise on benefits taken from relevant pension schemes
Box numbers and worked examples
Each individual has a lifetime allowance for contributions as set out in the table below:
|
2012-13 |
2011-12 |
2010-11 |
2009-10 |
2008-09 |
2007-08 |
2006-07 |
|
£1,500,000 |
£1,800,000 |
£1,800,000 |
£1,750,000 |
£1,650,000 |
£1,600,000 |
£1,500,000 |
The excess over the lifetime allowance of the benefits crystallising (usually when a pension begins to be paid) is taxable at the following rates:
55% if taken as a lump sum
25% in other cases.
A lifetime allowance higher than the annual amount set for the tax year.
This can also be referred to as a lifetime allowance test. Person received benefits from their registered pension scheme. A capital amount is applied to the amount received from the pension scheme. This capital amount is then converted into a percentage of the standard allowance for the tax year. Once the life time allowance has been used up a tax charge will be incurred.
If there are still benefits to be paid once the life time allowance has been used up, a lump sum may be paid and provided the client is under 75 this amount will be subject to tax at 55% if the remaining benefits are used to provide a pension then the tax rate is 25%, the 55% and 25% rates are known as a life time allowance charge. The income received when the benefits are used to provide a pension is still taxable at the normal income tax rates.
Each individual has an annual allowance as set out in the table below:
|
2011-12 |
2010-11 |
2009-10 |
2008-09 |
2007-08 |
2006-07 |
|
£50,000 |
£255,000 |
£245,000 |
£235,000 |
£225,000 |
£215,000 |
If the annual increase in an individual's rights under all registered schemes exceeds the annual allowance, the excess is chargeable at 40%.
The period of time over which the amount of savings put into the pension scheme is recorded.
Further guidance can be found here on HMRC’s Helpsheet345
Box 5 - used when a lump sum is paid in excess of Lifetime Allowance. Enter the amount of lump sum paid to you plus the tax paid by the scheme administrator (at 55%)
A lump sum of £365,400 is paid and declared in box 5; the scheme administrator is taxable at 55% = £200,970 tax due. However, tax of £200,900 has been paid and is shown in box 7, £200,970 tax due less £200,900 tax actually paid = £70 this £70 is added to the tax liability.
Box 6 - used when the remaining benefits are used to provide a pension. Enter the amount of the excess pension but do not include the tax paid by the scheme administrator. If the amount was used to provide a life time annuity the amount entered here should be the amount used to provide the annuity and include the tax paid by the scheme administrator (at 25%)
An excess of £67,514 is taken as a pension and declared in box 6: the scheme administrator is taxable at 25% = £16,878.50. However tax of £16,800 has been paid and is shown in box 8, tax due of £16,878.50 less tax paid of £16,800= £78.50, this £78.50 is added to the tax liability.
Box 7 - used to record tax paid by the scheme administrator which may have already have been declared in boxes 5 and 6
Box 8 - if the amount contributed exceeds the annual allowance (£255,000 for 2011-12) enter the excess amount into this box. This is taxable at 40%
An excess amount of £25,000 has been put into the pension fund and shown in box 8; tax at 40% is due on this of £10,000. This £10,000 is added to the tax liability.
Boxes 9 and 10 - if the amount contributed exceeds the special annual allowance and relevant income exceeds the limit for the year; enter the excess amount in Box 9 and Pension scheme reference number in box 10
Box 11 - enter the amount of any unauthorised payment received which is not subject to a surcharge, the scheme administrator will advise if the amount is unauthorised. A surcharge will apply if the unauthorised payments reach 25% of the value of the rights. For personal representatives this income is subject to tax at 40%
An unauthorised payment of £45,000 which has not been subject to a surcharge has been received and shown on box 9; tax at 40% is due of £18,000. This £18,000 is added to the tax liability. If any foreign tax has been paid the charge will be lowered by this amount, for example, if £2,000 foreign tax had been paid the charge would be lowered to £16,000
Box 12 - enter the amount of any unauthorised payment received which is subject to a surcharge, the scheme administrator will advise if the amount is unauthorised. A surcharge will apply if the unauthorised payment reaches 25% of the value of the rights. For personal representatives this income is subject to tax at 55%
An unauthorised payment of £16,500 subject to a surcharge has been received and shown in box 10; tax at 55% is due of £9,075. This £9,075 is added to the tax liability. If any foreign tax had been paid the charge would be lowered by this amount for example, if £1,000 foreign tax had been paid the charge would be lowered to £8,075.
Box 13 - unauthorised payment charges are not exempt from any double taxation agreements. Enter any foreign tax paid; this will be used to reduce the tax liability.
Boxes 14, 15 and 16 need only be completed if the estate has received a lump sum payment from a non UK pension scheme.
Box 14 - if the deceased left pensionable service (work) in a relevant scheme before their death then after death the estate received a refund of the contributions made to that scheme by the deceased, the estate is liable to a tax charge on the refund. Tax is due at 20% on the first £10,800 and then 40% on the remaining amount
A refund of £6,000 is received and shown in box 12; tax at 20% is due of £1,200. This £1,200 is added to the tax liability. If any foreign tax had been paid the charge would be lowered by this amount for example, if £1,000 foreign tax had been paid the charge would be lowered to £200.
Box 15 - a special lump sum death benefit charge is payable by the recipient of any of the following:
Pension protection lump sum death benefit
Annuity protection lump sum death benefit
Unsecured pension fund lump sum death benefit
Tax is payable at 35% of the amount received
A lump sum if £19,500 is received and shown in box 13; tax at 35% is due of £6,825. This £6,825 is added to the tax liability. If any foreign tax had been paid the charge would be lowered by this amount for example, if in this example £3,000 foreign tax had been paid the charge would be lowered to £3,825.
Box 16 - these charges are not exempt from any double taxation agreements. Enter any foreign tax paid; this will be used to reduce the tax liability.
For 2013 onwards Taxable refunds of contributions (overseas pension schemes only) is no longer included on the SA101.
