Sound advice to beat IHT

LABOUR'S plan to levy inheritance tax on pensions has sparked a rush among savers to rethink how they pass wealth to the next generation.

- By Harvey Jones

Since the Budget, one in eight Britons have updated or considered updating their will, according to law firm Lime Solicitors.

The changes, due to take effect in 2027, will see unused pension funds included in inheritance tax (IHT) calculations for the first time. That could push many estates over the £325,000 threshold, landing families with unexpected bills.

The nil-rate band will remain frozen until 2030, as will the supplementary £175,000 main residence relief when passing on family homes to relatives.

There is no IHT on inherited pensions currently, although beneficiaries may be liable to pay income tax on withdrawals, where the policyholder died from age 75.