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Inheritance Tax on Pensions

With some eleven months to go until unused pension pots get drawn into inheritance tax, HMRC has issued a technical note* setting out some of the regulations under which the new regime will operate. This, HMRC says, is just one of a series of guidance notes, with the final guidance update not expected until Spring 2027.

One of the key points arising from this technical note is the importance of executors identifying pension details at an early stage in the pre-probate process. That’s because most pension schemes affected operate under a discretionary basis in which the pension trustees decide who should receive death benefits after taking account of any expression of wish. Until that decision takes place, executors will not be able to properly complete probate forms. And with transfers of pots to spouses being exempt from inheritance tax but not transfers to others, this decision on who is to benefit from a pension can have a material effect on potential inheritance tax calculations.

This identification and decision process has to take place within six months after death in order for inheritance tax to be calculated and paid on time. If you are looking for advice on pensions or if your situation has changed and you may therefore need to review your existing pensions or investments, contact Beckworth by using one of the links on our website. 

* https://www.gov.uk/government/publications/inheritance-tax-on-pensions-technical-note/technical-note-inheritance-tax-on-pensions