Chancellor Rachel Reeves’ recent Budget announcement has raised concerns about the potential impact on pensions. Starting in April 2027, defined contribution pension pots will be included in estate inheritance tax liabilities. The nil-rate band freeze has also been extended until April 2030. If you’re a retiree, these changes may affect you. Our seasoned tax advisors in London can work with you to ensure everything is in order.
What does the Chancellor’s Budget mean?
The Chancellor’s Budget introduces changes that could result in double taxation on pensions for individuals who pass away at or after age 75. Tax rates could reach as high as 90% in some cases.
The Office of Budget Responsibility estimates that this change will affect an additional 1.5% of total UK deaths — that’s approximately 10,500 of the 213,000 estates with inheritable pension wealth between 2017 and 2028. Furthermore, due to the inclusion of pension assets in the estate’s value, some 38,500 estates may face an average additional inheritance tax liability of £34,000.
What happens if you’re double-taxed?
Your beneficiaries could face “double taxation” on your pension, which occurs when they withdraw funds and are subject to income tax at their marginal rate, especially if the pension was already taxed as part of your estate.
As a retiree, it’s essential to protect your beneficiaries from double taxation on your pension. If your pension savings exceed the total value of your estate (£2 million), the residence nil-rate band will be nullified, leading to significantly higher inheritance tax bills. Start planning now with the help of our tax advisors in London to mitigate this risk.
Plan your estate and avoid hefty taxes with Allenby Accountants.
Let our tax advisors in London help with retirement and estate planning to reduce inheritance tax. Contact us today by calling 0208 914 8887 to arrange a free, no-obligation consultation.
