Pension income meaning

FORTHCOMING CHANGE: On 26 November 2025, within Budget 2025, the government confirmed that from April 2029, only the first £2,000 each tax year of a pension contribution made pursuant to a salary sacrifice arrangement will be free of National Insurance contributions (NICs). Any amount sacrificed by an employee above £2,000 a year will attract both employer and employee NICs, so the portion over £2,000 will, for NICs, be handled in line with standard employee workplace pension payments, meaning the excess is treated in the same way as other employee workplace pension contributions for NICs purposes. Employer contributions are unaffected, as is income tax relief. Employers will need to report the total amount of salary sacrificed through existing payroll software, with HMRC committing to engage with stakeholders. HMRC will publish further guidance ‘before April 2029’. The National Insurance Contributions (Employer Pensions Contributions) Bill 2026 will insert a new subsection into section 4 of the Social Security Contributions and Benefits Act 1992 that empowers the government to make regulations providing for...

ARCHIVED: This Checklist sets out information on retirement options for DC members prior to 6 April 2015. It is no longer maintained and is provided for background purposes only. For more information on retirement options for DC members, see Practice Note: Retirement options—DC members. Pre-6 April 2015 pension payment options Until 5 April 2015, a DC member’s pension pot could be applied to deliver one of the following pension payments: scheme pension — a ‘scheme pension’ is either a pension paid straight from the scheme’s own funds by the scheme administrator, or a pension arranged with an insurance company selected by the scheme administrator. DC occupational pension schemes and personal pension schemes did not usually make a scheme pension available...

Aon plc, the British‑American management consultancy, said it would ‘naturally’ give company directors more sway over a scheme if trustees of defined benefit plans were obliged to obtain the sponsor’s agreement to a new ‘statement of strategy’, as outlined by TPR earlier in March 2024. TPR also stated that managers of defined benefit retirement schemes must lodge the strategy alongside their routine valuation documents from 22 September 2024. A defined benefit pension delivers a guaranteed income each year for life, determined by a worker’s final or average salary...

In this issue: Business structures Taxes management and litigation Employment taxes Companies and corporation tax VAT Environment Individuals and income tax Dates for your diary Trackers Daily and weekly news alerts New and updated content Latest Q&A Useful information Business structures Court of Appeal upholds UT and FTT decisions that incentivisation awards to partners are subject to income tax (HMRC v BlueCrest Capital Management LP and others and Andrew Dodd and others v HMRC) As noted below, in HMRC v BlueCrest Capital Management LP; and Andrew Dodd v HMRC [2023] EWCA Civ 1481, the Court of Appeal examined the tax position of awards granted to partners under an incentivisation scheme. It affirmed the rulings of the First-tier Tax Tribunal (FTT) and the Upper Tribunal (UT) that, although the awards were not profit share allocations, they still represented income and were chargeable to income tax as miscellaneous income under section 687...

In this issue: Companies and corporation tax Stamp taxes VAT Individuals and income tax Taxes management and litigation Employment taxes Budget and Finance Bills Daily and weekly news alerts New and updated content Dates for your diary Trackers Useful information Companies and corporation tax Court of Appeal decides interest on intra-group loans not restricted under transfer pricing rules but debits disallowed under unallowable purpose rule (BlackRock Holdco 5, LLC v HMRC) BlackRock Holdco 5, LLC v HMRC [2024] EWCA Civ 330 considers whether, for UK tax purposes, interest on intra‑group borrowing put in place to help fund a commercial acquisition is deductible. Two principal points were before the Court of Appeal: the transfer pricing analysis and the loan relationships unallowable purpose question. On the transfer pricing limb, the Court of Appeal allowed the taxpayer’s appeal. As a result, deductions for interest on the intra‑group loans were not curtailed by the transfer...

What is the Pensions Advice Allowance? Following consultation in 2016/17, the government brought in, from 6 April 2017, the Pensions Advice Allowance. It enables eligible pension scheme members to withdraw a fixed sum from their pension pot tax-free to cover holistic retirement advice. At the member’s instruction, the scheme may therefore reduce the value of the member’s pot by the advice fee and pay the funds straight to the member’s adviser. This measure stemmed from the Financial Advice Market Review, which highlighted an advice gap affecting people who require retirement planning support but cannot meet the cost from net-of-tax income or savings. It is available in addition to other existing advice allowances and payment routes for advice. These include adviser charging, which does not permit pension monies to be used to fund holistic retirement advice. For further details, see Other types of pensions advice measures below. The government’s aim is to help those preparing for retirement to use the Pensions Advice Allowance to fund holistic...

The main types of income are: employment income pension income social security income trading income property income savings and investment income miscellaneous income Traditionally, applying income tax required first identifying the income’s source and then confirming that it fell within one of the Schedules specified in the Income and Corporation Taxes Act 1988 (ICTA 1988). The Act initially arranged the categories of income liable to income tax into six historic Schedules: A, B, C, D, E and F. In 1996, the Tax Law Rewrite Project was launched to recast primary direct tax legislation. Following its completion, the Schedules were abolished for both income tax and corporation tax, with the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003), the Income Tax (Trading and other Income) Act 2005 (ITTOIA 2005) and the Income Tax Act 2007 (ITA 2007) introducing the new heads of charge to income tax...

THIS PRACTICE NOTE APPLIES TO MONEY PURCHASE ARRANGEMENTS FROM 6 APRIL 2015 From 6 April 2015, new pension flexibilities expanded the retirement choices for DC members and others with ‘flexible benefits’ (in essence, money purchase and/or cash balance entitlements). As part of those reforms, drawdown became more broadly accessible. For background on the changes implemented on 6 April 2015, see Practice Note: Pension freedoms—an introduction [Archived]. This Practice Note concentrates on the legal framework for drawdown arrangements set up on and after 6 April 2015. It also addresses how pre-April 2015 drawdown is treated from that date. For the rules governing drawdown before 6 April 2015, see Practice Note: Drawdown between 6 April 2011 and 5 April 2015 [Archived]. What is drawdown? The label ‘drawdown pension’ (often called ‘flexible income’) replaced ‘unsecured pension’ and ‘alternatively secured pension’ used up to 5 April 2011. Drawdown pension describes the method of paying benefits that allows members to set their own yearly income from a pension arrangement...

This Agreement is made on [ insert date ] Parties [ Insert Employer’s name ], whose registered office is at [ insert Employer’s address ], company registration number [ insert Employer’s company number ] (Employer); [ Insert Employee’s name ] of [ insert Employee’s address ] (you). The parties agree: Termination of employment 1.1 Your employment with the Employer [ will terminate OR terminated ] owing to [ insert reason for termination ] on [ insert date ] (Termination Date). 1.2 For the period up to and including the Termination Date, you [ will be OR have been ] paid your accrued basic salary (less deductions for income tax and primary class 1 (employee) National Insurance contributions ( PAYE Deductions )) and [ will have OR have ] received your contractual benefits [ , including a payment of £[ insert amount ] in respect of [ insert number ] days’ accrued but untaken holiday entitlement ] [...

FORTHCOMING CHANGE: On 26 November 2025, within Budget 2025, the government confirmed that, from April 2029 onwards, only the initial £2,000 per year in total of any pension payment under a salary sacrifice scheme arrangement will escape National Insurance contributions (NICs). Amounts employees sacrifice beyond £2,000 annually will attract both employer and employee NICs, meaning any sum over that limit will, for NICs purposes, be handled in the same way as standard employee workplace pension payments. Employer pension contributions are unchanged, and income tax relief also remains intact. Businesses must record the aggregate salary given up using their existing payroll software systems, and HMRC has pledged to consult and engage stakeholders, as required. Further HMRC guidance will be published ‘before April 2029’...

FORTHCOMING CHANGE On 26 November 2025, as part of Budget 2025, it was confirmed that from April 2029 only the first £2,000 per year of pension contributions made via a salary sacrifice arrangement will be exempt from National Insurance contributions (NICs). Any employee contributions sacrificed above £2,000 a year will attract both employer and employee NICs, meaning the portion exceeding £2,000 will, for NICs purposes, be handled in the same way as other employee workplace pension contributions. Employer contributions are unchanged, and income tax relief remains in place...