Harriet Betteridge writes for Tax Journal on the new IHT tax rules for pensions in the UK
In the Autumn Budget 2024, it was announced that from 6 April 2027, almost all unused pension funds and pension death benefits will form part of an individual’s taxable estate for IHT purposes. The draft Finance Bill has now been published, giving us a look at how this is likely to work.
- Which pensions will be taxed?
- Who is responsible for reporting and paying the tax?
- What’s the impact on planning?
Harriet Betteridge, Private Client Partner, examines some key questions surrounding the proposed legislation in an article for Tax Journal.
See below speed read for a summary:
From 6 April 2027, unused pension funds and death benefits will be included in an individual’s taxable estate for IHT, catching most UK pensions. Spouse and charity exemptions will be available to mitigate the tax charges, but agricultural and business property reliefs will not. Personal representatives will be obliged to report and pay the IHT, although the draft measures introduce a mechanism by which the beneficiaries of a pension can request the administrators to pay funds to HMRC to cover the tax. Income tax deductions will be allowed where pension funds are used to pay the IHT on the pension death benefits, avoiding double taxation there, but not for tax on the wider estate. The changes will significantly impact estate planning, and pensioners should review their nominations and consider their estate planning if they want to reduce their IHT tax exposure.
Read the full article in Tax Journal here (subscription required).
