New inheritance tax rules are set to alter how individuals use their pensions, with most unused pension funds being brought into the scope of inheritance tax from April 2027. This change could place many individuals in difficult positions, according to Steve Gauke.
The government estimates that around 10,500 estates will pay inheritance tax for the first time in 2027-28, and a further 38,500 will pay more. The average bill is expected to increase by approximately £34,000. These changes may lead to beneficiaries facing larger tax bills and smaller inheritances than anticipated.
Beneficiaries can typically wait six to 12 months for an inheritance, while inheritance tax is generally due by the end of the sixth month after death. Under the new rules, beneficiaries may only be able to access about half of affected pension benefits for up to 15 months. Families are advised to discuss inheritance plans, locate important documents, and consider how any tax bill would be paid, potentially by seeking independent financial advice.