Your pension is no longer safe from IHT

Added: 2026-06-02

[00:00:00]What are the new changes around IHT and when do they come in? You know, a lot of our readers ask about this all the time. So, it' be kind of good to know exactly what's happening.

[00:00:13]>> Yeah. I I mean, it feels like every second person that gets in touch with us at the moment, this is the driver for them getting in touch. And so, from April 2027, pensions will become inheritance taxable. So I think it's easier to understand the rules as they are now and then I can tell you what the changes are. So right now if you die before the age of 75 your pensions can go to whoever you want them to. You nominate them. It doesn't even have to be a family member. If you die after 75 they can still go to whoever you want them to but they that person has to pay tax at their rate when they spend it. And the good news is they don't have to wait till they're retired to spend it. They could be 21 and spend the money. as long as they pay taxes, they spend it, the money's theirs. And so, a lot of pension planning currently or not up till now has always been spend your other assets first because they'll fall into the estate and spend your pension last. And that's all really been sort of spun on its head because ne from April next year, um, pensions will form part of the estate. So, the same rules apply, but um let's say you've got £100,000 in pension and you're eligible for income for inheritance tax. 40,000 of that's going to come off immediately. The um beneficiaries will then receive the 60,000 that's left and then they will pay tax as I explained earlier. So you can get this situation where if you pay inheritance tax at 40% and then that person that is receiving the money is a 40 45% taxpayer is creating this aouble taxation but it's getting close to the 60% tax bracket as well. So, it's a um a double taxation on pensions that's worrying