Reduction in rate of taxation of lump sum death benefits
10 July 2015
Taxable lump sum death benefits paid to an individual who is the ultimate beneficiary will no longer be subject to the special lump sum death benefits charge at 45%. They will be taxed as pension income and tax will be deducted under PAYE.
Changes are being made so that where a lump sum death benefit is taxable it will be subject to the recipient’s marginal rate of tax where the lump sum is paid directly from the pension scheme to an individual who is the ultimate beneficiary.
Legislation will be introduced in Summer Finance Bill 2015 to amend FA 2004 and ITEPA 2003 and the measure will have effect in relation to lump sums paid on or after 6 April 2016.