Self assessment

jimmo

This is pretty high grade gobbledegook, difficult to explain and, I imagine, much more difficult for somebody not used to dealing with tax matters, to understand but here goes.

If I sold my house, moved out, bought a new house and moved in then my sale and new purchase would both be capital transactions.

For the person who buys my old house that too is a capital transaction but if I buy my new house from a builder then his sale to me will be a revenue (income) transaction and he will pay income tax on the profit he makes.

Similarly, in your pension lump sum situation, the lump sum is a revenue transaction from the pension administrator’s point of view but it is a capital transaction from yours.

Special rules make the pension administrator liable to 55% tax on the lump sum (revenue) he pays out but, from your point of view, the lump sum payout is a capital transaction. You are not liable to Income Tax and should not declare the amount you received as income (because it is capital) and, sadly from your point of view, you are not entitled to credit for the “tax” deducted by the administrator.

The bottom line is that you shouldn’t declare this as income and you shouldn’t claim credit for the tax deducted.

sunnystar

So, neither declared on tax return nor on tax credits. I think I understand. It's classed as a capital payment, not income.

I had tried googling, but came up with sections 636b and 636c, but couldn't find what the exemptions were.

Thanks very much for your help