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Pension report

09 September 2014
Issue: 4468 / Categories: Forum & Feedback , Income Tax , Inheritance Tax , Investments , Pensions

How should the tax liability be calculated on a pension paid after death?

Our client’s husband who was a higher-rate taxpayer died aged 83. The estate was wound up quickly because it passed to his widow.

She subsequently found an old pension policy and claimed the benefits from the pension company which has paid a lump sum consisting of the backdated annuity instalments since the husband’s 75th birthday. From the annual amounts (per fiscal year) the pension company has applied the age allowance and then deducted standard-rate tax from the balance for each year.

This lump sum was paid in the tax year after death with interest added less tax at 20% on the interest.

Can readers suggest the correct way of reporting this event to HMRC? We should also be grateful for advice on how any further liability should be calculated and in which tax years. Despite several letters and telephone calls HMRC seem unable...

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