New Pension Rules and IHT
The Autumn Budget introduced new Inheritance Tax (IHT) rules for pensions in the UK, which are set to take effect from April 2027[1]. As per the updated regulations, most unused pension funds and death benefits will be encompassed within an individual's estate for Inheritance Tax assessment purposes. This change implies that individuals may now face an IHT liability on their pension funds if not appropriately managed. However, it's essential to note that if one chooses to pass on their pension to their spouse or civil partner, this can be inherited tax-free, similar to other assets left to a spouse or civil partner[2].
Moreover, the Autumn Budget announcement signified a significant shift in the treatment of defined contribution pensions for inheritance tax considerations. A notable point from the Budget underscored that defined contribution pensions would now be subject to inheritance tax, marking a substantial modification in the treatment of pension assets[3].
By staying informed about these new IHT rules for pensions following the Autumn Budget, individuals can make informed decisions regarding their pension funds and estate planning to navigate the implications effectively.