When Inheritance Tax applies to pensions

Source: HM Revenue & Customs | | 03/12/2019

Inheritance Tax (IHT) is levied on a person’s estate when they die and can also be payable during a person’s lifetime on certain trusts and gifts. The rate of Inheritance Tax payable is 40% on death and 20% on lifetime gifts. There is a nil-rate band, currently £325,000 below which no Inheritance Tax is payable.

A pension is normally free of IHT and unlike many other investments is not counted as part of a deceased persons taxable estate. However, any money taken out of a pension before death becomes part of the deceased estate and could be subject to IHT. This includes any tax-free cash allowance which might not have been spent.

IHT charges relating to pensions can arise in relation to the following:

  • Lifetime transfers
  • Benefits within the estate
  • General power over benefits
  • Omission to exercise a right
  • Alternatively secured pensions

 



 

Latest News

Tax Diary December 2020/January 2021
25/11/2020 - More...
1 December 2020 - Due date for Corporation Tax payable for the year ended 28 February 2020. 19 December 2020 - PAYE and NIC deductions due for month ended 5 December 2020. (If you

Reasonable excuses for making a late furlough claim
25/11/2020 - More...
HMRC’s guidance on making claims through the Coronavirus Job Retention Scheme was updated on 19 November 2020. The updated guidance now includes various examples of what is meant

Search


Newsletter

With our newsletter, you automatically receive our latest news by e-mail and get access to the archive including advanced search options!

» Sign up for the Newsletter
» Login