Part 4: Income tax, corporation tax and capital gains tax Section 22: Pensions: some lump sum death benefits taxed as pension income Background note
This section, together with section 21, makes the tax system fairer by taxing as pension income certain lump sum death benefits individual beneficiaries receive where:
	The pension holder died having reached age 75; or
	The pension holder died under the age of 75 but the scheme administrator did not pay the lump sum within two years of being aware of the death.
	This pension income is subject to PAYE if it is paid from a registered pension scheme. If paid from a foreign pension scheme it is taxed as pension income and the PAYE processes do not apply. Taxing these payments as pension income will mean that some people will pay tax at a lower rate on the lump sum death benefit from 6 April 2016. So that taxable lump sum death benefits remain taxable even when paid to a beneficiary who is temporarily not resident in the UK, they have been added to the list of relevant withdrawals from a registered pension scheme that are taxable when an individual returns to the UK within five years of becoming non-resident.
	Where the lump sum is paid from a relevant non-UK scheme it will be taxable in the UK if the deceased was resident in the UK at their death or had been resident in the UK in the five tax years before death.