{"id":12284,"date":"2026-03-06T15:21:06","date_gmt":"2026-03-06T15:21:06","guid":{"rendered":"https:\/\/www.wealthtime.com\/advisers\/?post_type=blog&p=12284"},"modified":"2026-03-17T12:46:39","modified_gmt":"2026-03-17T12:46:39","slug":"pensions-and-iht-changes","status":"publish","type":"blog","link":"https:\/\/www.wealthtime.com\/advisers\/blog\/pensions-and-iht-changes\/","title":{"rendered":"Pensions and IHT changes: Act now to mitigate future IHT"},"content":{"rendered":"\n

Claire Trott, Technical Connection<\/p>\n\n\n\n

The landscape of pension and inheritance tax planning is shifting rapidly. As legislation continues to evolve, it\u2019s becoming increasingly important for individuals to reassess their retirement strategies and consider proactive steps to protect their estates.<\/p>\n\n\n\n

We are still dealing with the ever-changing legislation and proposals with regards to the inclusion of unused pension funds within inheritance tax calculations. We have seen a number of changes and announcements this tax year, but it remains that many who didn\u2019t have an IHT issue before will have one come April 2027.<\/p>\n\n\n\n

Those that had planned to pass on their pension IHT free to their beneficiaries may want to consider starting to act now to mitigate any IHT in the future \u2014 even though it isn\u2019t currently in legislation.<\/p>\n\n\n\n

One of the easiest ways to do this, and one that won\u2019t immediately cause an IHT problem, is to make gifts using pensions income.<\/p>\n\n\n\n

Using the gifts out of normal expenditure rules, taking pensions income on a regular basis and gifting it regularly can avoid any inheritance tax charges, if done correctly. These gifts need to be regular, sustainable and not reduce the standard of living of the person making the gift.<\/p>\n\n\n\n

Documentation is key to show that the income really is an excess and that the executor of the estate can prove this on death. The best way to record this is on the IHT403 form annually and document the advice clearly.<\/p>\n\n\n\n

It should be noted that you can\u2019t draw down your pension, gifting all the income whilst living off your capital. This needs to truly be excess income and so care should be taken to consider all assets the client is encashing and how they are classed. One example is that tax deferred withdrawals from an investment bond or international investment bond is a return of capital and as such can\u2019t be used to support the client for this calculation.<\/p>\n\n\n\n

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\"Claire<\/figure>\n<\/figure>\n<\/div>\n\n\n\n
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Using the gifts out of normal expenditure rules, taking pensions income on a regular basis and gifting it regularly can avoid any inheritance tax charges, if done correctly.<\/p>Claire Trott, Technical Connection<\/cite><\/blockquote><\/figure>\n<\/div>\n<\/div>\n\n\n\n

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