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If you're on a low income and have a purchased life annuity investment you could be paying Income Tax when you don't need to. If this is the case, you can register to get the income tax-free. You can also claim a refund of any tax you've overpaid.
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If you've got a purchased life annuity, 20 per cent tax will be automatically deducted from the income element you receive from it. However if your overall level of income means you're not a taxpayer you can ask to receive purchased life annuity income tax-free.
To make a claim you'll need to fill in a form R89 Application to receive an annuity without tax taken off. If you hold a joint life annuity you need to complete form R86 Application to receive a joint annuity without tax taken off. Send the form to whoever pays your annuity. You can download the forms below.
If you think you've paid too much tax on your purchased life annuity you'll need to fill in a form R40 Tax Repayment Form. You'll have to do this for each year you think you paid too much tax.
In most cases you'll get back the tax you've overpaid as long as you claim on time.
The time limits for claiming a refund are shown in the table below. If you don't make a claim within the time limit you'll miss out on any refund due.
|Tax Year||Tax year ended on||You must claim by:|
|2009-10||5 April 2010||5 April 2014|
|2010-11||5 April 2011||5 April 2015|
|2011-12||5 April 2012||5 April 2016|
|2012-13||5 April 2013||5 April 2017|
Your income and tax allowances can change from year to year - and during the year. So you may find your income goes up and your tax allowances no longer cover it.
If this happens it's important you tell your annuity provider straight away so they can start taking tax off your payments. Otherwise you may have a tax bill at the end of the year.
For help on reclaims for purchased life annuity income you can call the HMRC Retirement Annuity Helpline on Tel 0845 366 7868, open from 8.00 am to 8.00 pm Monday to Friday, and from 8.00 am to 4.00 pm on Saturday.
If you are calling from outside the UK you can contact the helpline on Tel + 44 151 471 8436.
Since April 2007 all other types of retirement annuity (personal pensions taken out before July 1988) have been taxed through the PAYE (Pay As You Earn) system so you should be paying the right amount of tax if any is due. To find out more read the related guide below.