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Guidance – James McMillan, senior associate solicitor and head of the wills, trusts and probate team at Punch Robson Solicitors, with associate solicitor Shannon Whyatt.
A summary of these changes is highlighted in the table below.
INHERITANCE TAX ALLOWANCES
Allowance Current Changes
Nil Rate Band |
£ 325,000 per individual |
No change( frozen until |
|
|
April 2030) |
Residence Nil Rate Band
Business Property Relief and Agricultural Property Relief
Up to £ 175,000 per individual( but reduces once an estate exceeds £ 2m)
Inheritance tax lifetime planning to preserve businesses and farmed land should therefore be considered and any actions ready to be implemented before the proposed implementation date of April 6, 2026.
With regards to pensions, the government consultation process ran earlier this year and the results of that have now been published.
It seems reasonably clear that the proposals are pressing ahead despite the concerns that were raised.
As with the other aspects, advice should be sought ahead of the implementation date, in this case April 6, 2027, but the earlier the better to allow time to plan effectively where possible.
The inclusion of any inheritable pension benefits in the estate for inheritance tax calculations will mean that more people
50 % relief applies in some instances but broadly a 100 % uncapped relief
No change( frozen until April 2030)
From April 2026, relief of up to £ 1m per individual. Thereafter 50 % relief to IHT
AIM, EIS and SEIS holdings |
100 % relief and uncapped |
From April 2026: 50 % relief |
|
|
to IHT |
Pensions |
Outside estate for IHT |
From April 2027: Forms |
|
|
part of the estate for IHT |
will pay inheritance tax and more people will pay more inheritance tax.
Within the government consultation there are also further aspects which mean that suitable professional advice should be considered at an early stage.
For example:
Income tax and inheritance tax on pension assets At present income tax is paid on a deceased member’ s fund if they pass away aged 75 or over.
The proposed changes will not remove this but are purportedly to be adapted so that income tax is not due on any inheritance tax paid on the pension component.
This will need to be carefully considered to ensure the right amount of tax is being paid.
Time limit for settling inheritance tax The current time limit of six months from death in which to settle any inheritance tax will most likely continue to apply.
Where pension payments are discretionary this may mean that a personal representative won’ t know for several months who the pension is being paid to and so won’ t know how much, if any, tax is due.
Prompt attention to this will be crucial in these circumstances.
Joint and several liability between beneficiaries of a pension and personal representatives The changes propose that the responsibility for inheritance tax on the pension component will be joint and several between the beneficiary of the pension and the personal representative.
Ensuring the correct tax is settled will be important for both parties to ensure no ongoing issues.
As can be seen, getting the right advice at the right time is, and will increasingly be, crucial.
At Punch Robson Solicitors our wills, trusts and probate team is skilled and experienced in aspects of more complex planning and estate administration.
Both myself, as a TEP, notary public, senior associate solicitor and head of the wills, trusts and probate team, and Shannon Whyatt, a TEP and associate solicitor in the wills, trusts and probate team, will be glad to help.
For more information, visit punchrobson. co. uk
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