SAM20030 - Assessments: stand-alone assessments: pensions taxable on the amount accruing in the year (accruals basis)
Source: gov.uk (2025-07-28)


Note: HMRC no longer raises assessments for pension arrears cases where earlier years are in Self-Assessment – for further information, please see SAM121160 (https://www.gov.uk/hmrc-internal-manuals/self-assessment-manual/sam121160)

In many cases, the taxable pension income for a tax year is the amount accruing in that year irrespective of when any amount is actually paid. Where the 'accruals basis' applies, the pension etc should be assessed on the amounts that the pensioner is entitled to in the tax year.

Detailed guidance concerning the taxation of pensions can be found in the Employment Income Manual. (See EIM75010 (https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim75010) onwards).

Pensioners are often content to pay income tax on the amount received in a year as, the amounts accruing and received are similar. However, it is possible in certain circumstances for the amounts to be substantially different, and assessments are required.

If a customer requests the statutory basis this should be accepted.

Assessments shouldn’t be raised for years where
- The customer didn’t make SA returns. For these years the PAYE underpayments should be calculated and net underpayment at the end of the last non-SA year should be recorded on the SA record using function CREATE SUNDRY CHARGE (Net Underpayment)
- The time limit for taxpayer amendments has not expired. For these years treat the amount accruing as a taxpayer amendment
Notes:

1.

The assessments should not be made until the SA return for the year in which the payment was made has been received. It is important that you record the PAYE underpayment and / or taxpayer amendment for earlier years on the SA system first, to ensure that any overpayment for the latest year is not repaid, where it needs to be set against these earlier years

2.

If you are notified of the payment by the pension provider, before the return is received, you should set the No Repayment signal on the SA record, to prevent a repayment being issued automatically when the return is captured

3.

The relevant due date for Section 101, FA2009 and Schedule 53 from 31 October 2011 (Section 86 up to 30 October 2011) interest purposes will be the statutory dates for the year of assessment

4a.

Create a Freestanding Credit on the SA record to utilise the credit available from the PAYE tax deducted in the year the pension was received Add an SA note to advise where the Freestanding Credit has originated from and write to the customer advising them of the overpayment and how this has been allocated. (See PAYE91090).

Note: FSC only needs to be used where no SA return was completed for the year of the discovery assessment and an unreconciled overpaid balance exists on NPS.

4b.

Any available credit from the PAYE tax deducted in the year when the pension was received should be transferred to OAS to be allocated back to the SA record with an effective date of payment (EDP) equal to the relevant dates.

5.

Where pension payments have been reallocated to the respective years, if the resulting tax paid for the year (when the payment was made) now exceeds the reduced payment figure, you should calculate the liability manually and enter it on the taxpayers record using function CREATE RETURN CHARGE