Income Tax (Earnings and Pensions) Act 2003 section 617

Deduction allowed from taxable pension income

Section 617 provides for a 10% deduction from the taxable amount of certain overseas government pensions paid in the UK.

• A 10% deduction is available against the taxable pension income amount calculated under the rules for overseas government pensions paid in the UK
• The deduction applies to the gross taxable amount before arriving at the net figure on which tax is actually charged
• This means only 90% of the calculated taxable pension income from qualifying overseas government pensions is ultimately subject to income tax
• The deduction feeds into the broader calculation of net taxable pension income, reducing the overall tax liability on this type of pension