Income Tax (Earnings and Pensions) Act 2003 section 645

Social security pensions: increases in respect of children

Section 645 provides a tax exemption for the portion of a social security pension that represents an increase paid because the recipient is responsible for a child.

• The part of a social security pension attributable to a child-related increase is exempt from income tax
• Social security pensions covered include any UK pension, benefit or allowance taxed as pension income under section 577
• The exemption also extends to overseas pensions, benefits or allowances that are substantially similar in character to those UK social security pensions
• Only the child-increase element is exempt — the main pension or benefit remains taxable as normal