Section 637Q — Income Tax (Earnings and Pensions) Act 2003: Availability of individual’s lump sum allowance

Availability of individual’s lump sum allowance 637Q 1 This section is about the availability of an individual’s lump sum allowance on the occurrence of a relevant benefit crystallisation event (“the current event”).

2 In this section—

a “ relevant benefit crystallisation event ”, in relation to an individual, means the individual becoming entitled to a relevant lump sum;

b “ relevant lump sum ” means—

i a pension commencement lump sum, or ii an uncrystallised funds pension lump sum.

3 If no relevant benefit crystallisation event has occurred in relation to the individual before the current event, the whole of the individual’s lump sum allowance is available.

4 Otherwise, the amount of the individual’s lump sum allowance that is available is—

a so much of that allowance as is left after deducting the previously-used amount, or b if none is left after deducting that amount, nil.

5 For this purpose “the previously-used amount” is the aggregate of the non-taxable amounts in relation to each relevant benefit crystallisation event that has occurred in relation to the individual before the current event.

6 In subsection (5) “ non-taxable amount ”, in relation to a relevant benefit crystallisation event, means so much (if any) of the relevant lump sum to which the event relates as is not, by virtue of any provision of this Chapter, taxable pension income . 6A Where more than one relevant benefit crystallisation event occurs in relation to an individual on the same day, it is for the individual to decide the order in which they are to be treated as occurring for the purposes of this section.

7 A reference in this section to a relevant benefit crystallisation event is to a relevant benefit crystallisation event occurring on or after 6 April 2024.

8 For transitional provision under which the amount of an individual’s lump sum allowance available on the occurrence of a relevant benefit crystallisation event may be reduced as a result of events occurring before 6 April 2024, see paragraph 125 of Schedule 9 to FA 2024.