From April 2027, pensions passed on after death will be subject to inheritance tax (IHT), as confirmed by Rachel Reeves in today’s Budget (30 October). Currently, pensions can be passed on free from IHT and aren’t counted as part of someone’s estate when they pass away.
Under the current rules, if a pension holder dies before reaching 75, any pension benefits left to beneficiaries are typically tax-free. If they die after the age 75 then the beneficiary pays Income Tax at their marginal rate.
New measures, introduced in today’s budget would change that treatment, potentially impacting the amount received by heirs.
In the Autumn Budget the government announced that it will bring unused pension funds and death benefits payable from a pension into a person’s estate for inheritance tax purposes from 6 April 2027.
"We’re closing a loophole created by the previous government, which became more prominent after the lifetime allowance was removed. From April 2027, inherited pensions will be subject to inheritance tax," the Chancellor stated.
We will report further on this topic as we learn about the details in the coming weeks.
Under the current rules, if a pension holder dies before reaching 75, any pension benefits left to beneficiaries are typically tax-free. If they die after the age 75 then the beneficiary pays Income Tax at their marginal rate.
New measures, introduced in today’s budget would change that treatment, potentially impacting the amount received by heirs.
In the Autumn Budget the government announced that it will bring unused pension funds and death benefits payable from a pension into a person’s estate for inheritance tax purposes from 6 April 2027.
"We’re closing a loophole created by the previous government, which became more prominent after the lifetime allowance was removed. From April 2027, inherited pensions will be subject to inheritance tax," the Chancellor stated.
We will report further on this topic as we learn about the details in the coming weeks.
Mark Chiva – Haverfords Pension Specialist
