Brits are being urged to plan ahead to avoid being caught out by new tax rules from HMRC. Major pension changes confirmed by the tax authority could see families facing larger inheritance tax bills and increased paperwork.
What Are the New Rules?
New guidance reveals that from April 6, 2027, most unused private pension pots and pension death benefits will be included in the value of a person’s estate for inheritance tax purposes. This change will affect more savers who previously viewed pensions as a tax-efficient way to pass wealth to loved ones.
Financial experts are warning families not to be caught off guard, as some estates may be pushed above inheritance tax thresholds.
Expert Commentary
Tim Grimsditch, managing director at Unbiased, said: “The latest HMRC guidelines which come into force on April 6, 2027, show that most unused pension funds and pension death benefits will be included in the value of a person’s estate for inheritance tax purposes.
“This means a significant number of families will find their loved ones’ estates pushed over the tax threshold, facing bills they wouldn’t have under the old rules.”
Extra Red Tape
Mr Grimsditch says the rules will be “unwelcome news for many”. Under the new system, personal representatives and executors will be responsible for gathering information from pension providers before HMRC can calculate any inheritance tax liability.
Probate may take longer as families face a new multi-step process rather than a direct handover. Representatives must contact every pension provider the deceased had to request official valuations, which must then be reported to HMRC before a bill can be calculated.
What Should Pensioners Do?
- Review estate planning arrangements
- Check pension beneficiary nominations are up to date
- Keep records of all pension schemes
- Consider broader pension withdrawal strategy
- Seek professional financial advice
Mr Grimsditch added: “If you want to protect your family from an unexpected tax bill or an administrative burden, you should consider seeking advice from a professional financial adviser well ahead of April to get your head around the changes, protect your assets, and give yourself peace of mind.”
