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Legislation
Income Tax (Earnings and Pensions) Act 2003

Crossheading Tax treatment of authorised lump sums

  • Section 637A Pension commencement lump sums
  • Section 637B Pension commencement excess lump sums
  • Section 637C Serious ill-health lump sums
  • Section 637D Uncrystallised funds pension lump sums
  • Section 637E Short service refund lump sum
  • Section 637F Refund of excess contributions lump sums
  • Section 637G Trivial commutation lump sums and winding-up lump sums
  1. Tax treatment of authorised lump sums
  2. Trivial commutation lump sums and winding-up lump sums

Section 637G | Trivial commutation lump sums and winding-up lump sums F1

From legislation.gov.uk

(1)Subject to subsection (2), a member of a registered pension scheme to whom—F1

(a)a trivial commutation lump sum, orF1

(b)a winding-up lump sum,F1

is paid under the scheme is treated as having taxable pension income for the tax year in which the payment is made equal to the amount of the lump sum.

(2)If, immediately before the lump sum is paid, the member has uncrystallised rights under any one or more arrangements under the pension scheme, the amount of the taxable pension income —F1F2

(a)if all the member’s rights under the pension scheme are uncrystallised rights, is 75% of the lump sum, andF1F2

(b)otherwise, is reduced by the tax-free element (if any).F1F2

(3)In subsection (2) “the tax-free element” means 25% of the value of any uncrystallised rights extinguished by the lump sum.F1

(4)In this section “uncrystallised rights” has the same meaning as in section 212 of FA 2004; and the value for the purposes of this section of any uncrystallised rights is to be calculated in accordance with that section.F1

Notes

  1. F1

    Pt. 9 Ch. 15A substituted (for the tax year 2024-25 and subsequent tax years) by Finance Act 2024 (c. 3), Sch. 9 paras. 41, 124 (with Sch. 9 paras. 125-132A) (as amended by S.I. 2024/356, regs. 1, 4; and (18.11.2024 for the tax year 2024-25 and subsequent tax years) by S.I. 2024/1012, regs. 1(2)(3), 17)

  2. F2

    Words in s. 637G(2) inserted (6.4.2024) by The Pensions (Abolition of Lifetime Allowance Charge etc) Regulations 2024 (S.I. 2024/356), regs. 1(1), 2

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