Who is liable for tax on pension annuities under section 592 of ITEPA 2003?

Under section 592 of the Income Tax (Earnings and Pensions) Act 2003, the person liable for tax on pension annuities and other annual payments falling within section 590 is the individual who receives the income or who is entitled to receive it. The recipient bears the ultimate tax liability.

Why was section 592 of ITEPA 2003 introduced?

Section 592 was introduced as a new provision because the previous legislation under ICTA Schedule E taxed pension annuity income but did not explicitly identify who was chargeable to tax. This section resolved that ambiguity by formally clarifying the recipient as the liable person.

Did section 592 change the tax treatment of pension annuities?

No, section 592 did not change the underlying tax treatment. It was introduced as part of the rewrite of earnings and pensions tax law and represents a formalisation of what was generally understood to be the position in practice, rather than a substantive change to the rules.

Does PAYE deduction affect who is liable for tax under section 592?

No. Although a pension provider may deduct tax at source under PAYE, the ultimate liability to income tax on annuities and annual payments under section 592 rests with the individual who receives or is entitled to receive the income, not the pension provider making the deduction.

Income Tax (Earnings and Pensions) Act 2003 section 592

Person liable for tax

Section 592 identifies the person who is liable to pay tax on annuities and other annual payments received from registered pension schemes and certain other sources covered by section 590.

This section establishes who is chargeable to tax on pension annuities and similar annual payments
The person liable for tax is the individual who receives or is entitled to the income
This provision was newly introduced by ITEPA 2003 to clarify a point that the previous legislation left unstated
Under the old rules (ICTA, Schedule E), the income was taxable but no specific person was expressly identified as the chargeable party

Access full legislation.And much more.

By becoming a member, your team gets full access to Tax World research tools and source-backed tax resources.

Become a member