Removal of 55% Tax

October 14th, 2014

Following a recent Treasury announcement with regards to the removal of the 55% tax charge on the passing down of pension funds, Liberty SIPP have given us a good clear summary of the changes. In short – the tables below sum things up very simply, however click here to have a look in more detail.

Current System

  Crystallised Uncrystallised
Below age 75 55% charge if paid as lump sum or dependent can draw down at marginal rate Can pass on as lump sum completely tax free to any beneficiary up to the deceased’s lifetime allowance
Above age 75 55% charge if paid as lump sum or dependent can draw down at marginal rate 55% charge if paid as lump sum or dependent can draw down at marginal rate

 

New System

  Crystallised Uncrystallised
Below age 75 Can pass on completely tax free to any beneficiary as a lump sum or as a drawdown pension Can pass on completely tax free as a lump sum to any beneficiary (up to the lifetime allowance)
Above age 75 Any beneficiary can draw down on it at their marginal rate or 45% charge if paid as a lump sum (marginal rate from 2016-17) Any beneficiary can draw down on it at their marginal rate or 45% charge if paid as a lump sum (marginal rate from 2016-17)