Hated new IHT bills looming for thousands

IN JUST over a year, Britons will start being liable to pay inheritance tax on unused pension pots at death, yet the vast majority remain completely unprepared.

- Edited by HARVEY JONES

The change was announced by Labour Chancellor Rachel Reeves in her first Budget in October 2024 and comes into force from April 2027. From that date, most unused pension funds and death benefits will be counted as part of an individual's taxable estate for inheritance tax (IHT) purposes.

Government estimates suggest an extra 10,500 estates will pay IHT in 2027/28, with roughly 38,500 facing higher bills than under the previous rules. While the immediate impact begins in 2027, the combination of a frozen IHT nil-rate band until 2031, rising property prices and investment growth means many more families are likely to be affected in the years after that.

The change is expected to be an administrative headache, as beneficiaries must settle any tax bill within six months, yet tracking down multiple pension pots and arranging payments could take far longer.