Making a trivial commutation payment
A trivial commutation pension payment is a one-off lump sum that pays off a pension in full, so that there's no need to make the usual weekly, monthly or annual payments. Typically, these one-off payments are used if the regular payments would be very small.
If you have already made standard payments from the pension before making the trivial commutation payment:
- for PAYE tax and National Insurance contributions (NICs) purposes, treat the trivial commutation payment in the same way as the earlier pension payments
- complete a form P45 to reflect the fact that the pension will have been paid off in full - the P45 should take into account both the regular payments you have made as well as the trivial commutation payment
- send P45 Part 1 to HM Revenue & Customs (HMRC) (remember you must file online if you have 50 or more employees); give Parts 1A, 2 and 3 to the pension recipient
If the trivial commutation payment is the first and only payment from the pension:
- there is no need to submit a form P46 (Pen) as is usually required when you start to pay a new pension
- use the emergency tax code on a week 1/month 1 basis when putting the trivial commutation payment through your payroll
- complete a form P45 - use the date of payment as both the starting and leaving date
- send P45 Part 1 to HMRC (remember you must file online if you have 50 or more employees), give Parts 1A, 2 and 3 to the pension recipient
To read more about filing forms P45 and P46 online follow the link below.
File your PAYE in-year forms online: P45, P46, etc
PAYE online filing for employers
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