Inheritance Tax on pensions - budget announcement and consultation

Cornish_mum

HUMBUG said:

I'm assuming I can leave the country before I die (maybe emigrate to Portugal that has no IHT) , take all my savings and not have to pay any extra taxes or penalties to the HMRC?

Hi Humbug,
Do be aware of Portugals mandatory inheritance laws, particularly the different treatment of spouses (esp. remarriage) and childrens rights to inherit. 
Also income and property taxes are much more progressive than the UK and the political mood there tends to the left. There has been recent very strong feelings about golden visas and how they have distorting the economy and property market.
My in-laws and husband are dual citizens and it’s a world of complexity, especially if there are assets or income streams in both countries, as Portuguese law can in some circumstances make it difficult to use UK IHT spousal exemption. 

Sarahspangles

marycanary said:

FIREDreamer said:

marycanary said:

 Three very different young men but I think we can all agree that number 1 made the sensible choice.

 As I recall the book deals with repeated Economic Outpatient Care not one off gifts.

Number 3 was the best choice surely, set up for life albeit took some risk to achieve it.

I was trying to make a joke as I didn't expect anyone on this site to think 1 was the best choice. Clear, from your reply it was a poor attempt at humour.

I must be in a minority, I thought Number 1 was a good choice. I did take a self-funded sabbatical a few years ago, and no regrets.

It’s like the Tale of the Three Brothers in Harry Potter - the three protagonists each think a different one of the three gifts is the obvious best choice.

zagfles

Sarahspangles said:

marycanary said:

FIREDreamer said:

marycanary said:

 Three very different young men but I think we can all agree that number 1 made the sensible choice.

 As I recall the book deals with repeated Economic Outpatient Care not one off gifts.

Number 3 was the best choice surely, set up for life albeit took some risk to achieve it.

I was trying to make a joke as I didn't expect anyone on this site to think 1 was the best choice. Clear, from your reply it was a poor attempt at humour.

I must be in a minority, I thought Number 1 was a good choice. I did take a self-funded sabbatical a few years ago, and no regrets.

It’s like the Tale of the Three Brothers in Harry Potter - the three protagonists each think a different one of the three gifts is the obvious best choice.

I agree. No.1 is the best choice. Assuming he did something meaningful like travel the world, something he'd never forget and be able to look back on for the rest of his life. I did a lot of travelling in my youth and am really glad I did, wonderful memories. Although it might not have been as exciting had I had a bit more money!

No 2 who spent on general living expenses implies he was living beyond his means, and what would he do once the money runs out. 

No 3 took a massive gamble, this time is worked spectacularly well but as I said earlier, if it's made him think he's an investment genius or if he's a gambler, it doesn't bode well for the future. 

Of course nobody chose option 4, something most of here would probably do, and fed it all into his pension so he could retire early

Quidditch

I read recently, that pensions are still the best show in town for high rate tax payers. The budget has not changed that. They get 40%+ tax relief now. The investments compound over time and if you have 25 years to go before retirement, much can change on the IHT front. Right now, the very attractive tax relief is there and we should focus on that.

I am interested to hear your views on this approach. Thanks

Sarahspangles

zagfles said:

I agree. No.1 is the best choice. Assuming he did something meaningful like travel the world, something he'd never forget and be able to look back on for the rest of his life. I did a lot of travelling in my youth and am really glad I did, wonderful memories. Although it might not have been as exciting had I had a bit more money!

No 2 who spent on general living expenses implies he was living beyond his means, and what would he do once the money runs out. 

No 3 took a massive gamble, this time is worked spectacularly well but as I said earlier, if it's made him think he's an investment genius or if he's a gambler, it doesn't bode well for the future. 

Of course nobody chose option 4, something most of here would probably do, and fed it all into his pension so he could retire early

If the objective is to retire with the shortest bucket list, no 1 wins, assuming he enjoyed his break. He may run out of money before time but he has derisked having regrets if he dies young.

If the objective is to retire early, no 2 may win assuming he used the additional cash to reduce the length of time he needs to work. He has also reduced the risk of regrets if he dies young.

If the objective is to retire with the fewest regrets I suspect no 3 may win on the basis that opportunities were seized! But not everyone enjoys the rollercoaster, and he might not enjoy a quiet if well-funded retirement at all!

Albermarle

poseidon1 said:

artyboy said:

HUMBUG said:

I'm assuming I can leave the country before I die (maybe emigrate to Portugal that has no IHT) , take all my savings and not have to pay any extra taxes or penalties to the HMRC?

Portugal had an exceptionally benign golden visa scheme that allowed you to take your pension income tax free for 10 years. Sadly that's now wound down, and there are (I believe) no QROPS options there so it's not quite such the slam dunk location it once was.

Ive decided though there's no point in investigating further right now, given I've got another 5 years before I can even touch my pensions...

The closure of Portugal's golden visa scheme is sadly mourned.

Without that 10 year tax exemption,  Income rates there are worse ( 43.5% hits at 37,791 euros and 48% at 81,199 euros ). Worst still capital gains are added to income and taxed at your income tax marginal rate.

Tax free nature of UK ISAs not recognised there ( or any other country with a developed tax system for that matter).

On the plus side no Inheritance tax per se, but Stamp Duty on inheritances at 10% only applies to Portuguese assets and only  if gifted otherwise than to direct family ( forced heirship rules apply but can be overridden with appropriate tax consequences). This can be especially useful when combined with qualifying UK IHT exempt investments discussed below.

 A quirk of the IHT system worth noting for Brits  who relocate permanently abroad, relates to personally holding Fotra government gilts ( effectively all UK gilts).

Fortra ( Free of Tax For Residents Abroad ) securities if purchased after April 2013 , are an  asset class which is IHT free for all non UK resident persons.  Provides an opportunity to have a fiscal foot in the UK without being hammered for IHT thereon even if still treated as UK domiciled.
However remains to be seen if this quirk survives the complete demolition of the non dom tax system  in  April 2025 ( this quirk  historically only favoured non doms until its extension to all non residents in 2013).

I am definitely not that well informed in this area, but I understand from a friends experience, that Cyprus can be an attractive place of residence for UK citizens from a tax point of view. ( the Greek part) 
I think you can buy your way in by buying a property over a certain value, and then tax on your UK pension income is only 5% and no inheritance tax. Plus due to to a tax treaty with the UK you should not be double taxed.
I suspect however it is not quite as simple as that and plenty of research needed. 

Lorian

I think I need to fill out and maintain drafts of all the IHT40x  forms for myself and leave for my executor to find. I wouldn't fancy sorting it out after 2027. 

Fluffysheep7

The effective rate of tax on pension could be 52% if loss of housing allowance is recognised.
My concern is with Pension Trustees who will after 2027 be making blind decisions on beneficiaries which could create tax liability. SIPP providers do not allow for contingent Expressions of Wishes on beneficiaries but they should.
As an example up until April 2027 I would like to pass on SIPP to children (basic inheritance planning) but after that it should go to my wife. The risk for the aged is ability or mental capacity to effect that change on 6 April 2027.