HMRC to tax pensions of workers who die before pension age
But, as Martin Lewis explained in a video, posted on his Twitter feed, Inheritance Tax is paid by relatively few people: "This is a tax there are so many misunderstandings about. Most people, when they die, their estates will not pay inheritance tax. This is primarily a tax that only affects the most affluent households."
Near retirement? There's a huge tax trap to avoid when withdrawing from a pension. This is my simple video analogy but always get 1-on-1 free guidance from PensionWise first.
This is just a titbit, watch my full Pension special on: https://t.co/lVn7Zofcag pic.twitter.com/dAeKweDMgW — Martin Lewis (@MartinSLewis) January 29, 2025
And Paul Barham, Tax Partner at Forvis Mazars says that many are using the allowances up until any rule changes to Inheritance Tax (IHT) occur: "Pensions can be a valuable tool when passing down wealth because they sit outside your estate for IHT purposes and as of April 2023, the lifetime allowance has been removed, so there is no limit on how much you can save over your lifetime.
"If you have assets inside and out of a pension plan, you'll want to consider when to draw down from your pension and whether to also consider using non-pension assets to meet the full cost of everyday life."
He adds: "Inheritance planning is notoriously complex. But there are advantages to starting earlier than you think is necessary. Seek the support of an adviser that you trust and one that you think will have your best interests at heart. While no one really wants to think about the need to pass on wealth, it can be of great benefit to your loved ones to get plans in place early."
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Any changes - even if they only hit the wealthiest taxpayers - have not been popular with the Conservatives. Speaking to reporters on the Isle of Wight, leader Kemi Badenoch said: 'Unemployment is up, growth is down, inflation is up, cost of living is putting a real squeeze on people's pockets.
'And it's because of Rachel Reeves's budget last year. I'm very worried about what's going to come in the next budget.
'We're seeing tax rises, even taxes on pensions, as potential solutions'
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