Diabolical pension inheritance tax on death 2027.

MikMikandThriceMik

So this new 40% tax on any pension inheritance is apparently coming in 2027.

What is the inheritance tax if a family member were to inherit their parents savings in an ISA or ordinary savings account?

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Thank you.

HedgehogRulez

give it now and ask your kids to pretend you’ve not died for 7 years?

MarkCarnage

Suggest you read HMRC website on IHT thresholds, rates and exemptions. Basically, assets in your estate net of any bequests to charities etc are taxable for IHT above the nil rate band of £325k with an additional allowance for your main residence of £175k. So £500k in total or £1m for a couple. That has been the case since before "that woman".

Why should your pension which has been built up on a tax exempt basis with relief on contributions, and no tax on capital growth be exempt from tax when it gets paid out? Whether that is to you or your children? Pensions have been an IHT loophole effectively which has now been closed.

Whether the thresholds are at the right level or the rate itself is another matter and for political discussion really.

DRS1

You could always emigrate. I believe Dubai has no inheritance tax at all. What is not to like?😁

Bobziz

Ensure that the value of your entire estate doesn't exceed £1m, or whatever the iht threshold is that applies to your situation on the date of your death.

Plenty of threads on this topic if you use the search facility. These changes were announced in autumn 2024.

Marcon

What is the inheritance tax if a family member were to inherit their parents savings in an ISA or ordinary savings account?

If IHT is payable, then it's 40% on parental savings in an ISA or other savings account.

What can we do now or after Apr2027 to stop that !!!!!! woman getting her hands on 40% of my pension that I want to give yo my kids?

Pensions are there to provide for your old age, so use them for their intended purpose.

Grumpy_chap

You can, of course, avoid the tax planned to start on April 2027 if you become deceased before that date.

You can, of course, use your pension for its primary purpose to provide for your best possible life-style through your retirement. Draw all the money down and spend it on good times.

You can, of course, draw the money down and gift it anytime you wish. That will avoid IHT (subject to surviving 7 years). It may not avoid DoA if you need care.

You can, of course, leave the pension residual at death to a charity. I understand that bequeaths to charity are not subject to IHT.

You can, of course, take the elixir to eternal life, thus avoiding inheritance ever arising.

dunstonh

What is the inheritance tax if a family member were to inherit their parents savings in an ISA or ordinary savings account?

Exactly the same.

So, a pension still beats an ISA or ordinary savings accounts net of all taxes in the vast majority of cases.

What can we do now or after Apr2027 to stop that !!!!!! woman getting her hands on 40% of my pension that I want to give yo my kids?

Gifting, moving to a different country or death before April 2027

The UK is an international outlier with one of the most severe IHT regimes globally. Although ironically, for estates under £1 million, the UK has one of the lowest effective inheritance tax rates. But once the estate reaches three million, the theoretical effective rate becomes one of the highest globally.

Veloflyer

Set up a trust? Give money to your children now and survive 7 years? Consult a tax lawyer? Emigrate? Persuade millions of UK citizens not to vote for such governments?

Keep_pedalling

Funny I thought the idea of a pension was to make sure you were comfortable in your latter years not to hord it for your kids to spend instead.

Bostonerimus1

UK DC pensions have flown under the radar for too long when it comes to IHT. Why would you get to avoid the IHT when you pass wealth down to heirs just because it's in a pension?

Read up about the IHT thresholds and allowances…IHT is not automatic. I think IHT on DC pensions is entirely sensible, but maybe the allowances should have been increased to soften the blow or a more progressive tax applied rather than a 40% cliff edge. If you think IHT might apply in your case then give money away as gifts to family or charities or as excess income.