Inheritance tax on pensions set to hit Britons hard in 2026
- Pensions will be subject to inheritance tax starting in two years, according to Chancellor Rachel Reeves.
- Before this change, unspent pension funds were not counted as part of an estate for tax calculations.
- The new policy could result in a significant financial burden for beneficiaries inheriting pension pots.
In a significant policy shift, the Chancellor of the Exchequer, Rachel Reeves, announced that pension pots will become subject to inheritance tax starting in two years, marking a major change in how pensions are treated after the death of the owner. Previously, retirement savings were not considered part of an individual's estate for tax purposes, but this newly implemented law will now include all unspent pension funds. This decision comes amid rising opposition from various groups, particularly farmers, who are protesting against Labour's inheritance tax reforms. There are concerns that this change will lead to more individuals being liable for inheritance tax, drawing criticism from tax experts who warn of a potential 'triple whammy' charge affecting various assets. Individuals with substantial pension pots could face inheritance tax rates of up to 40% on estates exceeding £325,000, culminating in a daunting financial burden for their beneficiaries. Overall, the alterations to pension tax laws are set to have profound implications on estate planning and inheritance for many Britons, leading to a call for discussions about potential changes to mitigate the impact of these new regulations.