Income Tax (Trading and Other Income) Act 2005 section 422

Charge to tax on purchased life annuity payments

Section 422 establishes that income tax is charged on payments received under a purchased life annuity, while identifying key exemptions that may apply.

• Income tax is charged on annuity payments made under a purchased life annuity
• Part of each annuity payment may be exempt from tax, representing the return of the original capital used to purchase the annuity
• Specific exemptions apply to immediate needs annuities, personal injury damages payments and compensation awards
• Only the income element of each payment is subject to income tax, not the capital element