Inheritance Tax changes in the budget

Fandango68

Can anyone please help - I can't find the answer anywhere.

As a result of the budget pensions will come within the scope of IHT and therefore my children will suffer 40% IHT on the unused capital they will inherit within my pension. Will it still be the case that if I die after the age of 75 that they will pay their marginal rate of tax AS WELL on the inherited pension or will this provision be removed?

p00hsticks

As far as I'm aware the fine detail of how this will all work is currently being drafted and won't come into affect until 2027 at the earliest.. 

jlfrs01

According to an interview with a Pensions Expert I heard on the radio shortly after the Budget was revealed, the government will indeed double-dip on Tax if the Pension exceeds the Income Tax threshold. Clearly, many people planning for their retirement will now have no incentive to provide in later life either.

Flugelhorn

we haven't touch out private pensions and decided that the pots would be best labelled as being for the offspring to pay our inheritance tax bill. looks like we might have to think again

Keep_pedalling

The best solution is to make good use of your pension to spend on yourselves, that is after all what pensions are for.

Flugelhorn

Keep_pedalling said:

The best solution is to make good use of your pension to spend on yourselves, that is after all what pensions are for.

TBH I still haven't got my head round the LTA thing, hit 101% so  presume would still be taxed somehow (?40% ??)  if I took any of the private pension, which I really don't need. Idea was to leave it - but now maybe better to take as income and pass it on the to the offspring as gifts from excess income - at least they won't pay income tax on it 

Keep_pedalling

How much income tax you pay on withdrawals depends on your other income is. Have you reached state pension age yet?

relaxtwotribes

Flugelhorn said:

but now maybe better to take as income and pass it on the to the offspring as gifts from excess income

Or a PET.  But, essentially there is little point in taking it as income now, (with 40% income tax) and then not passing it on, the consequence of which would be an IHT bill on the net amount taken.  Probate value dependant , of course.

Linton

jlfrs01 said:

According to an interview with a Pensions Expert I heard on the radio shortly after the Budget was revealed, the government will indeed double-dip on Tax if the Pension exceeds the Income Tax threshold. Clearly, many people planning for their retirement will now have no incentive to provide in later life either.

It is not a double dip but rather compensating for the fact that the money paid into the pension was tax free.  Just suppose you cashed in your pension and then bequeathed the proceeds paying IHT. Under the new proposals if you left the pension to a non-spouse and they cashed it in hwe tax take would be the same (in principle).  Why should the tax take be different depending on which way around the cash-in and the inheritance take place.

Secondly it wont affect "many" people at least as a % of the population.  Most estates dont pay any inheritance tax and most people dont bequeath pensions to non-spouses.  On another thread the estimater was given that 7% of all estates would be affected.

To claim that people have no incentive to provide for their retirement is bizarre.  The whole purpose of pensions is to pay for your retirement not tax avoidance. Why would people choose to live their final days in poverty to avoid a tax they probably wouldnt be paying anyway?

Flugelhorn

Keep_pedalling said:

How much income tax you pay on withdrawals depends on your other income is. Have you reached state pension age yet?

almost! other income takes me into 40%