HMRC could u-turn over new inheritance tax rules for UK households

HMRC
-Credit:Reach Publishing Services Limited


HMRC could U-TURN over new inheritance tax rules from the Labour Party government, it has been claimed. The bosses of the savings and investment giants AJ Bell, Aegon, Hargreaves Lansdown have issued warnings to the Labour government.

Tom Selby, of AJ Bell, warned: “Government plans to bring pensions into inheritance tax risk turning into a slow-motion car crash, adding significant delays to the payment of money to beneficiaries, hiking costs, miring estates in complexity and creating the ludicrous situation where funds are effectively taxed twice if someone dies over the age of 75.”

Kate Smith, of pensions firm Aegon, said: “We do not support unused pension and death benefits being shoehorned into the inheritance tax regime, as this is unworkable and riddled with issues. Inheritance tax is already complex, and including pensions within the regime makes it even more so.

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“We are asking HMRC to explore a simpler and more effective alternative that would keep any tax charges payable on death within the pensions regime, such as levying a tax on pensions in scope where above a certain level."

Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, added: “We expected the Government to tackle the tax treatment of pension death benefits in the recent Budget, but bringing pensions into inheritance tax adds complexity and potential cost at a point when families are already under extreme pressure.

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“Inheritance tax is to be paid six months after death – it can take years to find beneficiaries and during that time interest is being added to the inheritance tax bill. This can delay probate and mean that families are put under intolerable financial strain.”

Baroness Ros Altmann, a former pensions minister, said: “The current proposal is an existential threat for defined contribution pensions. It’s bonkers. It skews the incentives to save for retirement. Pension firms won’t know how much IHT to pay. It will be an absolute mess."