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  • RE: Tax on Pension Compensation

    In accordance with HMRC manual, SAIM2075 reference CG13020 and CG13021, if you meet these conditions, your redress payment will be exempt from both income tax and capital gains. As the redress payment is not liable to income tax, it is not required to be shown on your tax return if you normally complete one. The 25% deduction which is tax free is treated as your normal tax free allowance that would apply when withdrawing from a normal pension, the remainder is the tax relief which was already applied being reclaimed. Hope this helps you and any future people who are not sure where to start.