Purchased Life Annuity Tax
Published / Last Updated on 06/04/2024
Purchased Life Annuity Income Tax
This page deals with the taxation position for Purchased Life Annuities.
If you have an annuity from a Pension Plan, you should visit the Pensioner Income page.
A purchased life annuity is where you invest a sum of money, your capital, in return for an income.
This income may be guaranteed for life or term based, i.e. it may be for specific period of time.
When paying your 'income' it is deemed:
- A part return of capital - not subject to tax
- A part income payment subject to normal savings taxes
Deduction at source
The purchased life annuity company will deduct tax at source 20% only on part as the annuity is not paid wholly out of profits or gains subject to income tax.
The annuity company will pay any taxes deducted in the normal way to HM Revenue and Customs. If you are a higher rate tax payer, you may have further taxes to pay.
The annuity company will confirm to you the proportion of the 'income' paid that is taxable and that which is not.
Request tax advice today.