annuity payments - income tax

glennenatp

Hi All
I am thinking of using a pension pot (DC type) to by an annuity on the 8th Jan 2020, taking a cash lump sum of 25% first then buying the annuity. If I defer the annuity/pension payments (in arrears) to be made every 3 or 6 months which tax year will the income be counted in 2019-2020 or 2020 – 2021?

xylophone

Many salaries are paid in arrears - your annuity income is like a salary?

Your pension payer will give you a P60 each tax year - this will show the taxable income for that tax year?

westv

glennenatp wrote: »

Hi All
I am thinking of using a pension pot (DC type) to by an annuity on the 8th Jan 2020, taking a cash lump sum of 25% first then buying the annuity. If I defer the annuity/pension payments (in arrears) to be made every 3 or 6 months which tax year will the income be counted in 2019-2020 or 2020 – 2021?

At 3 months the first payment will be 8th April so will be in the 2020/21 tax year.

jamesd

Why an annuity? Are you anywhere close to your state pension age, say within five or so years? How much will you be spending and how much income will you be getting for that cost? Have you checked whether an enhanced annuity would pay more?

The main reason for asking about state pension age is that deferring it normally pays much more than buying annuities. Around twice as much and inflation linked wouldn't be surprising.