Aiden died in 2020 and left the balance of his ARF to his son, Paul, who was aged 27 at that time. This benefit was:

• A. subject to capital gains tax at 33% at source
• B. subject to income tax at standard rate at source
• C. subject to income tax at 30% at source
• D. taxed under PAYE at Aiden's marginal rate of income tax

Answer: (C)

ARF death benefits to a non-dependent beneficiary are treated as income and taxed at source at a flat rate of 30%. In this scenario, Paul is a non-dependent recipient of the remaining ARF balance, so the payment attracts a 30% income tax withholding at the time it’s paid. This approach is distinct from capital gains tax, and it isn’t taxed at the deceased’s marginal rate or via standard PAYE rates on other income. Thus the correct treatment is income tax at source at 30%.