Guidance

Newsletter 151 — June 2023

Published 30 June 2023

1. Annual allowance calculator

We told you in pension schemes newsletter 149 that we would update the annual allowance calculator to reflect the increase to the annual allowance, adjusted income and money purchase annual allowance for the 2023 to 2024 tax year.

We’ve completed this work and your members can now use the calculator for the 2023 to 2024 tax year.

2. Abolition of the Lifetime Allowance — payment of stand-alone lump sums

Following the Spring Budget 2023 announcement that from 6 April 2023 the lifetime allowance charge would be removed, and fully abolished from the 2024 to 2025 tax year, we received feedback on the impact this would have on the payment of stand-alone lump sums (SALS).

The government has amended the Finance (No. 2) Bill to make clear that any amount of a SALS in excess of the 5 April 2023 maximum may still be paid to the member as a SALS and where there is an excess, this is subject to the member’s marginal rate of Income Tax. We would like to thank stakeholders for their engagement with us on this issue and can confirm that Finance (No. 2) Bill has now completed report stage and third reading.

2.1 Lump sum taxation

Where you identify one of these lump sums, normal PAYE rules will apply to these payments where there is 5 April 2023 maximum excess.

If the member has a P45 in the current tax year from a previous source or employment and it’s dated on or after 6 April 2023, you should operate the code on the P45 on a Month 1 basis and deduct the tax from the excess amount.

In all other circumstances, including where the member has a P45 from the previous tax year, you should use the emergency tax code on a Month 1 basis against the payment and deduct the tax from the excess amount. The emergency tax code for the 2023 to 2024 tax year is 1257L.

As these lump sums will be a one-off payment you’ll need to issue a P45 to the recipient.

2.2 Lump sum reporting

In March 2023 we published a lifetime allowance guidance newsletter, setting out how the taxation of lump sums should be reported. The tax you deduct must be reported and paid through your payroll. Until changes can be made to the Real Time Information (RTI) programme to identify these separately, you’ll need to use some existing data items from 6 April 2023. The following table shows what to enter for the different data items.

Data item	Description	What to enter
24	Starting date	Enter the time of reporting the first payment to the recipient. Do not include the starting date if it has already been reported in an earlier submission.
34	Annual amount of the occupational pension	Enter the taxable amount of the lump sum paid.
38	Payroll ID	Include the payroll ID, if you want to use one.
41	Leaving date	Use the date of payment as the leaving date on their payroll record so this is sent to HMRC when you report your payroll information.
41A	Taxable pay to date in this employment	Enter the total taxable element of the pension paid to date.
41B	Total tax to date in this employment	Enter the total tax to date in this pension.
42	Pay frequency	Select ‘One-Off’.
55	Tax code operated on this payment	Use the emergency tax code on a ‘Week 1’ or ‘Month 1’ basis or where you have a current year P45, use that code on a ‘Week 1 or Month 1’ basis.
58	Taxable pay in this period	Enter the taxable pension in this pay period.
58A	Value of payments not subject to tax and National Insurance contributions in pay period	Enter any non-taxable element of the pension payment for payments made by Bacs (Bankers Automated Clearing System).
145	Occupational pension indicator	Enter ‘Yes’.
172	Serious ill health lump sum indicator	Enter ‘Yes’.
173	Flexible drawdown taxable payment	Enter the taxable element of the payment. You must also include this amount in the ‘taxable pay to date’ and the ‘taxable pay in this period’ fields.
174	Flexible drawdown non-taxable payment	Enter the non-taxable amount of the payment. You must also include this amount in the ‘non tax or National Insurance contributions payment’ field 58A.

We understand that it may take time to update your payroll systems to report this. You should do this as soon as possible and by no later than 30 September 2023. Until your systems are updated, you should still deduct the tax using the current year P45 for the member, or using the emergency tax code, on a Month 1 basis. Once your systems are updated, you must report and pay all tax deducted from payments from 6 April 2023 onwards and issue any outstanding P45s.

The 2023 to 2024: Employer further guide to PAYE and National Insurance contributions — CWG2 will be updated as soon as possible and we will provide an update in a future newsletter.

If you’re unable to update your systems by 30 September 2023, contact us at [email protected] and put ‘Lump Sum RTI Reporting’ in the subject line.

3. Managing Pension Schemes service

3.1 Pension scheme migration

Take action to migrate your pension schemes now.

You should now migrate pension schemes from the Pension Schemes Online service to the Managing Pension Schemes service. This service will provide functionality making it quicker and easier for you to self-serve, make claims and fulfil all your pensions tax obligations.

As a scheme administrator, you must enrol on the Managing Pension Schemes service first.

You must enrol on the service using the Government Gateway username and password for your existing ‘A0’ administrator ID. If you have multiple scheme administrator IDs, you must enrol on the Managing Pension Schemes service using the username and password for your ‘Master’ ID.

You can find more information on ‘Master’ and ‘Ancillary’ IDs in migrating your pension schemes to the Managing Pension Schemes service.

After you have enrolled you must migrate your pension schemes.

1. Sign in to the Managing Pension Schemes service.

2. Select ‘Add a pension scheme from the Pension Schemes Online service’.

3. Select each scheme you need to migrate and provide the information requested.

You can find further guidance on migrating your pension schemes to the Managing Pension Schemes service on GOV.UK.

3.2 Event report

We will release event report functionality for the 2023 to 2024 tax year on the Managing Pension Schemes service this summer. We will update you once it is live, in a future managing pension schemes service newsletter.

To submit any new event reports for the tax year 2023 to 2024 onwards, you’ll need to migrate your pension scheme to the Managing Pension Schemes service and submit the report there. You can only submit your event report once the tax year has ended, unless you’re reporting that the pension scheme:

• has wound up
• has become a master trust
• has ceased to be a master trust

If you need to submit a new event report or amend an existing event report for the tax year 2022 to 2023 or earlier, you can continue to do this on the Pension Schemes Online service.

3.3 Filing Accounting for Tax returns

If you need to submit an Accounting for Tax (AFT) return for the quarter 1 April 2023 to 30 June 2023, you’ll need to do this by the filing deadline of 14 August 2023 to avoid interest and penalties.

If the pension scheme has a Pensions Scheme Tax Reference (PSTR) beginning with ‘0’, and you have not already done so, you need to migrate your pension scheme to the Managing Pension Schemes service to be able to file your return.

Find information on how to submit an AFT return using the Managing Pension Schemes service.

3.4 Pension scheme return

From April 2024, you’ll need to submit pension scheme returns for the tax year ending 5 April 2024 on the Managing Pension Scheme service, instead of using the Pensions Scheme Online service.

To make sure you’ve got enough time to do this, you should migrate your pension schemes to the Managing Pension Schemes service by April 2024 at the latest.

If you have migrated your scheme before April 2024, you’ll receive a notice to file a pension scheme return, with a filing deadline of 31 January 2025. But if you migrate your pension scheme after 31 October 2024, notices to file for the tax year 2023 to 2024 will have a filing deadline of three months from the date of issue.

If you delay migrating your schemes further, notices to file for any applicable years will automatically be issued and backdated to the tax year 2023 to 2024.

For example, if you choose not to migrate your pension schemes to the Managing Pension Schemes service until 1 August 2026, you’ll receive:

• a notice to file a pension scheme return for tax year 2023 to 2024 with a filing deadline of 1 November 2026
• a notice to file a pension scheme return for tax year 2024 to 2025 with a filing deadline of 1 November 2026
• a notice to file a pension scheme return for tax year 2025 to 2026 with a filing deadline of 31 January 2027

If we do not receive a pension scheme return by the specified filing deadline, you’ll be charged a £100 penalty. We may also charge daily penalties of up to £60 if you still do not submit the return. You can find more information on reporting to HMRC.