When people ask if I\u2019m worried about inheritance tax, my instinctive answer is no. With five sisters, any family inheritance is sliced more ways than a birthday cake, and not a very big one at that. <\/p>\n
But that doesn\u2019t mean I wouldn\u2019t like the option to pass on more of my own hard-earned wealth to my children one day. Like most parents, I make financial decisions with their future in mind. Surely that is something the tax system should encourage, not punish.<\/p>\n
According to the latest figures released by HM Revenue and Customs, the Treasury received \u00a35.2 billion in inheritance tax receipts between April and October this year. This is no small change, and is \u00a3200 million more than in the same period last year. What was once a niche tax affecting the very wealthy has quietly crept down the income ladder. Frozen thresholds mean that more modest families are now getting caught in the net.<\/p>\n
\u2022 Families face \u00a33m inheritance tax bills on \u2018failed gifts\u2019<\/a><\/p>\n For years the one tax shelter that remained untouched was for pensions. But from April 2027 that\u2019s changing. Most pension funds will become part of an estate for inheritance tax purposes. This is expected to raise about \u00a31.4 billion a year once fully in force and will come with profound emotional and behavioural consequences.<\/p>\n This change has been widely sold to us by the government as \u201cremoving distortions\u201d and preventing pensions from being used as an inheritance vehicle. However, for millions of savers pensions aren\u2019t an inheritance vehicle at all, but rather a safety net for retirement. <\/p>\n To my knowledge, it was never made clear why pensions were originally excluded from inheritance tax, but I suspect the practical consequence was to encourage people to keep their long-term savings intact, ready for later life or care costs. <\/p>\n