| Pension funds could become subject to Inheritance Tax from April 2027 | Unused pensions may be included in the value of your estate | Planning ahead could help reduce the impact on your beneficiaries |
Major changes to the Inheritance Tax (IHT) regime surrounding pensions are coming in April 2027 (subject to legislation) and it’s important to be prepared for them.
Depending on the size of your pension pot, it could mean your beneficiaries paying more in IHT than you might have planned. You might find that you and your family are affected by the new rules without realising it.
The best thing you can do is make sure that you and your loved ones are informed and protected ahead of time.
Previously, pensions were exempt from IHT, meaning there was no need to pay it on inherited pensions. However, from April 2027, pensions will fall under the scope of IHT and form part of a deceased individual’s estate. An ‘estate’ refers to the assets, investments and other valuables a person owns at the time of their death.
This means that your loved ones could have to pay IHT on your unused pension funds and death benefits. The standard rate of IHT is 40%, so your beneficiaries could face considerable tax liability unless you plan ahead.
The government is making these changes because, in some cases, pension schemes were marketed or used for tax planning purposes or for transferring wealth rather than funding retirement. It also means that different types of pensions will be treated more fairly under the new IHT rules.
Although the clock is ticking, there is still plenty of time to act. We’re here to help you every step of the way.
Gifting and trust strategies can have tax implications and may not be suitable for everyone. The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. The Financial Conduct Authority does not regulate Will writing, tax and trust advice and certain forms of estate planning.
