Inheritance Tax  

Budget 2024: Inherited pensions move into scope of IHT from 2027

Budget 2024: Inherited pensions move into scope of IHT from 2027
(Leon Neal:Getty Images)

The government will bring inherited pensions into inheritance tax from April 2027.

Delivering Labour's first Budget for 14 years today (October 30), chancellor Rachel Reeves said she would “close the loophole created by the previous government” and will bring pensions into the scope of IHT from April 2027.

Experts have warned that this will have a large impact on estate planning, especially those with larger estates and pension pots.

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Mike Ambery, retirement savings director at Standard Life, part of Phoenix Group, said: “Now, the value of pension pots will be added to the total value of other assets and if over the IHT threshold of £325,000, aside from other exemptions, will be taxed in the same way.

"This represents a fundamental shift to how wealthier individuals think about accessing their money in retirement.

"At present it makes more sense to access Isas and other forms of saving before touching pensions. In time we’re likely to see more pensions, accessed earlier to prevent them from becoming part of people’s IHT bill at a later date."

Commentators have warned the end result of this change is that many more people will now be brought into scope for IHT.

Ambery added: "While there could be some benefit to the Treasury, pensions are a long-term investment and it’s vital that large-scale changes to how they are taxed are well managed to avoid any risk of undermining confidence in pensions and scaring people from engaging with their retirement savings."

amy.austin@ft.com