Significant Lack of Awareness Of Labour’s Pension Inheritance Tax Changes
A report recently published by research firm Opinium found a significant lack of awareness amongst the 8.5 million people aged 55+ who could be directly impacted by the announcements in Labour’s first budget. Changes include the financial plan shattering move to include pension benefits into the scope of an individual’s estate from April 2027 for Inheritance Tax (IHT) purposes.
Despite the budget announcement and significant press coverage, awareness remains alarmingly low. The research found that only 6% of adults over 55 have adjusted their financial plans in response to the change and 40% are completely unaware of any changes.
Projections indicate that the new rules could double the estates subject to IHT with the shift expected to generate an additional £1.46 billion annually by the 2029/2030 financial year.
The report also highlighted a lack of knowledge around existing gifting rules that could help mitigate any IHT liability. Among those 55+:
79% are unaware they can give up to £250 per person to multiple individuals without triggering IHT.
78% do not know that certain gifts for occasions like birthdays or Christmas are exempt.
65% are unaware that gifts between spouses are IHT-free.
62% are uninformed about the Annual Exemption, which allows £3,000 in tax-free gifts per year, with unused allowances transferable to the next year.
53% do not know that gifts may be exempt if the donor lives at least seven years after giving.
In terms of managing potential IHT implications effectively, open discussion with the wider family and beneficiaries is critically important. It has been proven that families who engage in these meaningful conversations (preferably facilitated and led by a SOLLA-accredited independent financial adviser), experience significant financial benefits, not least through a reduction or even elimination of IHT.
The lack of awareness and planning could leave many estates unprepared for the upcoming tax changes, potentially increasing the IHT burden on beneficiaries. We strongly recommend individuals seek professional advice particularly around the pension IHT changes and also consider options like the gifting examples listed above, setting up different types of trusts or even IHT free investments to manage any IHT liability. IHT remains a voluntary tax paid by families that don’t take the relevant advice and action!
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If you are concerned about how the budget impacts your situation, contact us to book on one of our free Financial Planning Under Labour seminars at Stoke Lodge: May 7th or May 14th 1.30 – 2.30pm – email marketing@haroldstephens.co.uk / call 011 3636 212.