How Annuities Are Taxed
It is important to understand how the system works in order to get the most from it. Below we will give you the basics to help you but please feel free to get in touch at any time.
What is tax-free cash?
You can select to receive up to 25% of your pension fund as a tax free lump sum at the beginning of your retirement. This may be paid either by your pension provider or your annuity provider, depending on how you buy your annuity.
How is your income taxed?
Please note this information is only a general tax summary and individual circumstances may differ. We can give you more details about your personal tax position if you get in touch. Tax rules may change in the future but this was correct from the beginning of 2016.
Your annuity income will be treated as earned income in the same way a salary would be it is then taxed according to your personal circumstances. Your annuity income payments will normally be made after the tax payable has been deducted. Any payments made to you or your dependant's estate may be subject to inheritance tax following death.
To get more information about annuities, please continue to browse our advice centre.