Income Tax (Earnings and Pensions) Act 2003 section 631

Taxable pension income

Section 631 sets out how to calculate the taxable pension income for pre-1973 overseas pensions paid under the Overseas Pensions Act 1973, including a built-in 10% reduction and the treatment of such income as relevant foreign income.

• Where section 629 applies, the taxable pension income for a tax year is the full amount of the pension income arising in that year
• The pension income is calculated on the basis that the pension is only 90% of its actual amount, providing an automatic 10% deduction
• The pension income is treated as relevant foreign income, allowing a deduction for expenses attributable to collecting or receiving it
• The section effectively taxes these pensions as foreign pensions, even though they are now paid by the UK government on behalf of former overseas governments