Income Tax (Earnings and Pensions) Act 2003 section 637A

Pension commencement lump sums

Section 637A confirms that no income tax is charged on a pension commencement lump sum paid from a registered pension scheme.

• A pension commencement lump sum paid under a registered pension scheme is completely exempt from income tax.
• This exemption applies to the lump sum typically taken when a member first starts drawing their pension benefits.
• The lump sum must be paid under a registered pension scheme to qualify for the exemption.
• This provision was introduced by the Finance Act 2024 as part of the reformed framework for taxing pension lump sums.