There is a special charge to income tax, currently at the rate of 45%, on certain lump sum benefits, imposed by FA 2004, s. 206, and which is known as the special lump sum death benefits charge.

Lump sum benefits paid on or after 6 April 2016

If an individual receives such a benefit on or after 6 April 2016, the benefit will be charged as taxable pension income under ITEPA 2003, s. 579B (see ¶383-000) and hence subject to tax at his marginal income tax rate. The tax is the liability of the individual in receipt of the lump sum. However, payments to trusts or companies will remain subject to a special 45% tax charge that also applied to individuals before 6 April 2016.

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