Inheritance Tax Confusion

coyrls

MallyGirl said:

penners324 said:

tim9333 said:

penners324 said:

People also seem to ignore that tis proposal removes the 75 age limit on pensions being transferable tax free

Why are you assuming the 75 age limit will be changed?

Annex B of the consultation says 

"In most cases the Income Tax treatment of the benefit will depend on the age of the member when they died". 

Because I've been to a tax seminar on this and the pensions expert advised that the 75 year age limit will disappear under the new rules (if they become law as published). Many website from IHT and pensions experts also say this.

the consultation doesn't currently say that the 75 rule will change

Not only that but it also has pre and post 75 examples to illustrate the difference.

Albermarle

Fermion said:

squirrelpie said:

Fluffysheep7 said:

Why will DC pots not be simply part of one's Estate with the change? Why won't Executor's pay all IHT due rather than beneficiaries having to pay with already taxed monies (see Consultation)?

Why do you say this? The consultation says the pension scheme administrators will pay any IHT on pensions. The beneficiaries are not involved. Why do you claim otherwise?

I'm confused about this. We have Wills which leave 10% of our Net Estate to charity, thus reducing our IHT rate from 40% to 36%. Does the consultation say whether the rate the scheme administrators will use will be 40% or 36% viz. If the former then it's not being treated as a full component of the estate. 

On a related point, I had assumed that bringing pension pots into the full scope of IHT as part of the estate then this would mean it would not be subject to tax at the beneficiaries marginal rate. Is this incorrect? I had assumed that the tax situation for pension pots when the deceased is post 75 will be neutral if the beneficiaries are higher rate tax payers?

On the first point regarding the effect of charitable giving, no doubt this will become clearer during the consultation and draft legislation process.
Presumably by April 2027 the rules will be clearer.

Ciprico

I read that defined benefit pensions will be treated differently to say an annuity purchased out of a defined contribution pension as far as iht is concerned.

This sounds unfair and self serving to the politicians.....

BikingBud

Ciprico said:

I read that defined benefit pensions will be treated differently to say an annuity purchased out of a defined contribution pension as far as iht is concerned.

This sounds unfair and self serving to the politicians.....

They are treated differently because they are different.

Do you mean hat defined benefit generally stops when you die and there is no residual pot- so no lump sum to tax, although there are some schemes that pay a "widow's" pension?

And that some annuities will pay back the remaining pot after death? So there is still a pot to asses for IHT.

Perhaps you could explain more and provide a source. 

penners324

coyrls said:

MallyGirl said:

penners324 said:

tim9333 said:

penners324 said:

People also seem to ignore that tis proposal removes the 75 age limit on pensions being transferable tax free

Why are you assuming the 75 age limit will be changed?

Annex B of the consultation says 

"In most cases the Income Tax treatment of the benefit will depend on the age of the member when they died". 

Because I've been to a tax seminar on this and the pensions expert advised that the 75 year age limit will disappear under the new rules (if they become law as published). Many website from IHT and pensions experts also say this.

the consultation doesn't currently say that the 75 rule will change

Not only that but it also has pre and post 75 examples to illustrate the difference.

Would seem I misunderstood what was stated. Thanks

Albermarle

Ciprico said:

I read that defined benefit pensions will be treated differently to say an annuity purchased out of a defined contribution pension as far as iht is concerned.

This sounds unfair and self serving to the politicians.....

There are many different types of annuities, so the answer will be different depending on the type.