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Welcome to the Söderberg Self-Service Centre!

Do you accept scheme pays?

  • Updated

Where the client exceeds the pension annual allowance, 'Scheme Pays' is the ability for some or all of the annual allowance tax charge to be paid out of a pension scheme. See the Pensions Tax Manual for further information.

Conditions

There are conditions that apply to 'Scheme Pays':

  • The annual allowance charge for the tax year across all pension schemes is greater than £2,000
  • The pension contribution to the scheme from which the charge will be taken exceeds the annual allowance for the same tax year
  • The client must notify us by 31 July in the calendar year following the end of the relevant tax year
    • e.g. a charge relating to the 2024/2025 tax year, the notification must be received by 31st July 2026

If these conditions are met and mandatory 'Scheme Pays' is being used, the individual and the scheme become jointly and severally liable for the annual allowance charge.

'Scheme Pays' can only be used when the £60,000 annual allowance is exceeded.

Exceeding the Money Purchase Annual Allowance or tapered Annual Allowance is ignored.

What information is needed?

  • The client’s title, full name, address (including postcode) and national insurance number
  • The tax year to which the annual allowance charge relates
  • The amount of the tax charge liability that the client wants the scheme to pay
  • Confirmation that the amount of the liability they want the scheme to pay has been calculated at the proper rate
  • A declaration confirming that:
    • they cannot withdraw the notice and
    • their benefit rights in the scheme will have to be adjusted to take account of the tax that will be paid on their behalf by the scheme. 

The 'Scheme Pays' application form can be found here.

Amended client notices

The client can change the amount they have asked the scheme to pay. The request must be received no later than the 31st July six years from the end of the tax year to which the tax charge relates.

Receiving a transfer where benefit accrual gave rise to an annual allowance tax charge

If the client has transferred all their benefits to the Seccl Personal Pension from a pension scheme into which the benefits accrued gave rise to the charge, they can require the charge to be paid from the Seccl Personal Pension providing the notification deadline is met; and

  • The pension transfer received was from a scheme into which the benefits accrued gave rise to the charge
  • They would otherwise meet the conditions for scheme pays

Early notification

The client can only notify the pension scheme before the end of the tax year in which the charge arises when:

  • They intend to fully access their pension or
  • They are approaching age 75 with unaccessed funds or funds in drawdown. The notification must be received either:
    • Before the funds are accessed or
    • Age 75 is reached.

HMRC reporting

There are two HMRC returns that need to be completed:

  • We will account for any annual allowance tax charge in our Accounting for Tax (AFT) return
  • The client will also need to include it on their self-assessment.

Voluntary scheme pays

Where the conditions for scheme pays are not met, then a scheme may pay the client’s annual allowance charge on a voluntary basis. With voluntary scheme pays, the liability remains with the client. Soderberg doesn’t offer voluntary scheme pays.