Taxation and Retirement Annuities

Since April 2007 the way you pay tax on a retirement annuity has changed. Before 5th April 2007, unless you had completed a form R89 (Application to Receive an Annuity Without Tax Taken Off), your retirement annuity would be paid with tax taken off at the basic rate. After this date, annuities were taxed through PAYE system, in the same way that occupational or personal pensions are taxed. This means that the amount of tax taken from your annuity will be calculated using your tax code, and the total amount you pay each year will be shown in the P60 End of Year Certificate. A tax year runs from 6th April one year to 5th April the next year.