Summary

Introduction
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Lifetime annuities are a popular choice for generating a steady income in retirement. In Timeline Planning, this income type is always treated in gross terms, allowing for a comprehensive understanding of your financial picture. This article will delve into how National Insurance and Income Taxes are calculated for the 'Lifetime Annuity' income type.
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​Lifetime Annuity Explained
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In Timeline Planning, a lifetime annuity is considered a yearly income source. Advisors can input the gross amount of the annuity and then calculate the net value that the client would receive.
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Just like other income types, a lifetime annuity can be adjusted for inflation based on the Consumer Price Index (CPI). If this option is selected, a 0% collar is applied, ensuring that the income will not decrease even in times of deflation.

​Step #1: National Insurance Tax
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For income received from a lifetime annuity, no National Insurance taxes are applied.
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Step #2: Income Tax
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Income tax for the 'Lifetime Annuity' type is computed based on the most recent tax rates and bands. The total tax is then subtracted from the gross income to arrive at the net income value.
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Example
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Let's consider Kieran, who receives an annual lifetime annuity of £70,000. Timeline Planning calculates his income tax as follows:

The total income tax Kieran has to pay is £15,432, leaving him with a net annual income of £54,568.
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Conclusion
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The 'Lifetime Annuity' income type in Timeline Planning provides a structured way to plan for a steady income during retirement. Understanding how National Insurance and Income Taxes are calculated for this income type can help advisors and clients make more informed financial decisions.
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