Tax on lump sum death benefit payments

A lump sum death benefit payment is a lump sum paid from a pension scheme following the death of the member or beneficiary.

If the member or beneficiary was 75 or over when they died, the following lump sum death benefit payments are taxable:

You should always deduct tax on trivial commutation lump sum death benefit payments through PAYE (Pay As You Earn).

For payments other than trivial commutation lump sum death benefits, you should deduct the special lump sum death benefits charge.

For payments other than trivial commutation lump sum death benefits, the amount you deduct depends on who you make the payment to. You should deduct either:

If the lump sum was paid to a trust, and then pays it to a beneficiary, the beneficiary can claim back some or all of the tax.

If you pay a defined benefits or uncrystallised funds lump sum death benefit, you must provide the following information to the deceased member’s personal representative:

You must provide this information within 3 months of the final payment.

If you pay a tax-free lump sum death benefit, you must provide the following information to the deceased member’s personal representative:

You must provide this information within 3 months of the final payment.