they could be taxed<\/a> up to 40 per cent if the estate exceeds the IHT threshold of \u00a3325,000, unless the estate is left to a spouse.<\/p>\nCurrently, unspent pensions are typically passed to beneficiaries tax-free.<\/p>\n
HMRC estimates that around 10,000 new estates will immediately be liable for IHT because of the introduction of pensions, while around 40,000 estates will have to pay considerably more than under previous rules.<\/p>\n
The issue, experts explained, is that you cannot actually work out the IHT due on an estate until you have confirmed the exact amount of pensions a person had, any benefits attached to those pensions and who the beneficiaries are.<\/p>\n
To find this out, the person administering the estate will have to go back and forth with each pension scheme, and only then can they apply for probate and get the IHT resolved.<\/p>\n
Experts have already warned that households could face delays of up to a year to get probate granted because of delays to pensions admin, even if they do not owe any tax.<\/p>\n
This could lead to some families owing thousands of pounds in fines and interest.<\/p>\n
Adam Cole, retirement specialist at wealth manager Quilter, said: \u201cUnder current rules, IHT must be paid within six months of death, after which interest starts accruing.<\/p>\n
\u201cThis will create real challenges when executors are waiting for pension providers to confirm values, as delays would be outside their control.<\/p>\n
\u201cFamilies may initially face interest charges on tax they don\u2019t ultimately owe, or be forced to submit estimates that later need correction.\u201d<\/p>\n
The pensions industry has been calling on HMRC to change its rules to ensure families are not unfairly penalised for delays in this process.<\/p>\n
Mr Cole told The i Paper that his company has been engaging with the Government about \u201crecognising these practical realities\u201d.<\/p>\n
He said: \u201cWe share concerns about the timing mismatch between probate processes and pension beneficiary decisions. Many would argue this isn\u2019t fair, because the system assumes all information is readily available, which is rarely the case.<\/p>\n
\u201cWhether the Government should change the rule is ultimately a policy decision, but we believe any reforms should recognise these practical realities.<\/p>\n
\u201cWe continue to engage with policymakers to help ensure any changes are fair, proportionate and practical.\u201d<\/p>\n
Steve Webb, former pensions minister and partner at pension consultants LCP, said it is already \u201cadding insult to injury\u201d to charge interest for late payment of IHT and has called on HMRC to extend the deadline when pensions are involved.<\/p>\n
\u201cIt is already a difficult and time-consuming process to sort out someone\u2019s estate after they have died, especially if they leave little paperwork,\u201d he said.<\/p>\n
\u201cAdding pensions to the mix will make the whole process much more challenging, and people winding up estates will be at the mercy of delays from pension schemes over which they may have no control.<\/p>\n
\u201cIf IHT has to be applied to pensions, the least that HMRC could do is recognise the extra work which bereaved families will face and extend the deadlines before starting to charge interest and penalties on people trying to do their best at a difficult time\u201d.<\/p>\n
HMRC has been contacted for comment.<\/p>\n","protected":false},"excerpt":{"rendered":"The change to inheritance tax rules means there could be an increase in people being charged late fees…\n","protected":false},"author":2,"featured_media":232491,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[64,63,99,186,36756,1794,184,185,4961],"class_list":{"0":"post-232490","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-personal-finance","8":"tag-au","9":"tag-australia","10":"tag-business","11":"tag-finance","12":"tag-inheritance-tax","13":"tag-pension","14":"tag-personal-finance","15":"tag-personalfinance","16":"tag-tax"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/232490","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=232490"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/232490\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/232491"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=232490"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=232490"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=232490"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}