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

Pension commencement excess lump sums

Section 637B deals with the tax treatment of pension commencement excess lump sums paid to members of registered pension schemes.

• A pension commencement excess lump sum is treated as taxable pension income in the tax year it is paid
• The taxable amount equals the full amount of the lump sum received
• This provision was introduced by Finance Act 2024, Schedule 9, paragraph 41
• The income is classified as pension income and taxed accordingly through the PAYE or self-assessment system