HMRC’s pension schemes newsletter for April covers several of the Spring Budget pensions announcements. Of particular interest will be the treatment of lump sum death benefits from defined benefit schemes where, following representations from industry, HMRC has decided not to switch the burden for determining a member’s unused lifetime allowance from HMRC to the administrator. Instead, and until HMRC develops a longer-term solution, the current process for taxing defined benefit lump sum death benefits or uncrystallised funds lump sum death benefits, where HMRC determines the tax treatment based on information provided from the member’s personal representatives, will continue to apply. This mirrors the process which applied for testing benefits against the lifetime allowance and which would have resulted in a 55% tax charge pre-6 April 2023 but for which tax will now be calculated at the individual’s marginal rate, following the Budget announcements.
HMRC’s pension schemes newsletter for April covers several of the Spring Budget pensions announcements. Of particular interest will be the treatment of lump sum death benefits from defined benefit schemes where, following representations from industry, HMRC has decided not to switch the burden for determining a member’s unused lifetime allowance from HMRC to the administrator. Instead, and until HMRC develops a longer-term solution, the current process for taxing defined benefit lump sum death benefits or uncrystallised funds lump sum death benefits, where HMRC determines the tax treatment based on information provided from the member’s personal representatives, will continue to apply. This mirrors the process which applied for testing benefits against the lifetime allowance and which would have resulted in a 55% tax charge pre-6 April 2023 but for which tax will now be calculated at the individual’s marginal rate, following the Budget announcements.
