Significant adjustments to Inheritance Tax regulations may lead to the potential taxation of your pension funds even if you haven’t yet reached the retirement age.
Currently, inheriting a pension from an individual who passed away before the age of 75 incurs no Inheritance Tax. However, if the deceased person was over 75, Income Tax is applicable when withdrawing money from the inherited pension.
Starting April 2027, inherited pensions will be subject to Inheritance Tax and considered part of the deceased individual’s “estate,” which includes property, assets, and cash.
It is now confirmed that this rule will apply even if the individual passed away before reaching the eligible age to access their pension, currently set at 55 but increasing to 57 from April 2028. This development coincides with the DWP confirming a new Winter Fuel Payment deadline, urging pensioners to take action.
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Inheritance Tax does not apply to death in service payments. An HMRC spokesperson stated to <a class="TextLink_text-link__dBSS0 TextLink_enabled__dJF3l" href="https://www.pensions
