Autumn Budget 24: Inherited pensions to face IHT from 2027
Impacting wealth transfer efficiency and legacy planning
Pensions passed on will be subject to inheritance tax (IHT) from 2027, Rachel Reeves has confirmed in today’s (30 October) Budget.
Pensions are currently exempt from IHT and not classed as part of an estate when someone passes away.
“We will close the loophole created by the previous government, made even bigger when the lifetime allowance was abolished, by bringing inherited pensions into inheritance tax from April 2027,” Reeves said.
Pension death benefit rules mean there is no tax to pay for any recipient if the member dies before the age of 75.
If death occurs before age 75 then no tax applies, and if after age 75 then the beneficiary pays Income Tax at their marginal rate.
Pension changes were widely speculated in the Autumn Budget.
Pension freedom rules mean more people now take an income from SIPPs or other defined contribution pension funds. This has made pensions an extremely tax-efficient way to pass on assets to the next generation – which is not what they were primarily intended for.
Sahar Nazir (Professional Adviser