Annuity tax treatment

FebruarySecrets

My wife is a low earner with a state pension and an annuity income. This will exceed £12,570. Can the annuity income be treated as savings income rather than general income to take advantage of the better tax treatment.

sammyjammy

no because its not savings income.

FebruarySecrets

Many thanks, shame as it was derived originally from savings. Such is life !!

FIREDreamer

FebruarySecrets said:

Many thanks, shame as it was derived originally from savings. Such is life !!

Is it a pensions annuity? Then it isn’t treated as savings income.

Is it a purchased life annuity (ie not purchased using pension money). Then I think the non capital element might be taxed as savings income.

What type of annuity is it?

Moonwolf

The most common annuities are pension annuties where someone has taken 25% tax free from their pension and bought an annuity with the rest.  This is all treated as income for tax purposes, essentially as no tax was paid when it was put into savings.

There are also purchased life annuities which are rarer but can be bought from taxed savings.  In this case a proportion of the money is treated as returned capital and is not taxed.

In either case, in general, your annuity provider should be getting a tax code for you and doing PAYE on your behalf.