Brightwell comments on the inheritance tax on pensions technical consultation
As announced at the Autumn Budget 2024, from 6 April 2027 most unused pension funds and death benefits will be included within the value of a person’s estate for Inheritance Tax purposes and pension scheme administrators will become liable for reporting and paying any Inheritance Tax due on pensions to HMRC.
The technical consultation on the processes required to implement these changes for UK-registered pension schemes closed today (22 January).
Commenting on the consultation, Michelle Esterkin, Head of Admin Consulting at Brightwell said: “As currently proposed, the IHT changes will potentially delay payouts and place significant additional administrative burden on pension schemes at considerable cost.
“We believe the government can achieve its aims by allowing pension schemes to continue to distribute any lump sum death benefits tax free to beneficiaries in line with current practices.
“The legal personal representative of the Estate should, as is currently the case with wider inheritance tax payments, be responsible for the reporting and payment of any future inheritance tax due on pensions. “By adopting these proposals, beneficiaries would be able to access the funds immediately and avoid any financial hardship which could otherwise occur if they are left waiting for the full estate to be valued and tax deducted before they are paid their benefits. It would also avoid adding greater complexity to the tax system.”
Published:
22 / 01 / 2025
