Spending to beat the taxman<\/p>\n
Inheritance tax is levied at a rate of 40pc, but many of those caught in the net can expect much larger bills once income tax is factored in.<\/p>\n
Andrew Tully, of investment platform Nucleus Financial, said: \u201cA 52pc to 67pc overall tax bill will be commonplace, especially on the second death in a couple. It could even be as high as 90pc with other impacts, such as the loss of tax-free allowances on very large estates.<\/p>\n
\u201cHMRC is treating pensions as a capital asset for the purpose of inheritance tax, but also an income source for the purposes of tax. It\u2019s a case of having your cake and eating it for HMRC, but not for the diligent pension saver.\u201d<\/p>\n
In response, many savers have withdrawn their cash to keep it out of the taxman\u2019s hands.<\/p>\n
Figures from the Financial Conduct Authority showed that savers withdrew a record \u00a371bn from their retirement pots in 2024-25.<\/p>\n
It marked an increase of almost \u00a320bn from the previous year, as almost a million pots were accessed for the first time. Experts said this was a clear response to the inheritance tax changes.<\/p>\n
Even though pension withdrawals can be accompanied by a 45pc income tax bill, the added threat of inheritance tax has forced many savers\u2019 hands.<\/p>\n
Ian Cook, of wealth adviser Quilter Cheviot, said: \u201cI\u2019ve got a client who\u2019s bought a supercar, as he knows his children will lose that money to at least 40pc taxation when he dies.<\/p>\n
\u201cI\u2019ve got another aggressively drawing down his pension because he doesn\u2019t trust the Government to do the right thing when he\u2019s gone. Another had a multimillion-pound pot, but withdrew half of it and gave it away.<\/p>\n
\u201cBoth are paying higher and additional rate tax, but it still makes sense for them, as they could lose 67pc in tax under the new rules.\u201d<\/p>\n
But many savers are taking decisions on their own without consulting experts \u2013 and Mr Cook warned it could be a costly mistake.<\/p>\n
\u201cThe majority of people are paralysed by fear because of these changes,\u201d he added. \u201cThey\u2019ve saved into pensions for years to support themselves, and their children and grandchildren after they die, only for the goalposts to suddenly move.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"Spending to beat the taxman Inheritance tax is levied at a rate of 40pc, but many of those…\n","protected":false},"author":2,"featured_media":665764,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[84,4176,10429,2053,2222,4178,4174,4175,214642,5438,42032,58919,56,54,55],"class_list":["post-665763","post","type-post","status-publish","format-standard","has-post-thumbnail","category-personal-finance","tag-business","tag-finance","tag-inheritance-tax","tag-labour-party","tag-money","tag-pensions","tag-personal-finance","tag-personalfinance","tag-private-pensions","tag-standard","tag-tax-rises","tag-top-story","tag-uk","tag-united-kingdom","tag-unitedkingdom"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/665763","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/comments?post=665763"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/665763\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media\/665764"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media?parent=665763"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/categories?post=665763"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/tags?post=665763"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}