Clive Weber
- Consultant
- Pensions & Employee Benefits
HMRC’s draft legislation issued on 21 July 2025 for Technical Consultation features the points of principle in the adjacent box.
Many comments have been made in response to the Consultation. We now await the Finance Bill which may contain changes. Further changes may arise as the Finance Bill makes its way through Parliament.
- IHT is to apply to registered pension scheme death benefits from 6 April 2027 subject to the exclusions announced on 21st July 2025; and
- Primary responsibility for paying IHT on pension death benefits is switched from pension scheme administrators (usually scheme trustees) to the deceased member’s personal representatives (usually the executors under the member’s Will).
For the background to IHT and pensions, click here for the article in Part 4, December 2024 Pensions Compass.
Timeline
30 October 2024 – the Chancellor announced in her 2024 Autumn Budget that IHT is to apply to certain pension benefits and launched a Technical Consultation
22 January 2025 – HMRC’s Technical Consultation closed.
21 July 2025 – HMRC announced the results of the Consultation and published draft legislation for the Finance Bill 2025/2026. The Technical Consultation on the draft legislation closed on 15 September 2025.
26 November 2025 Budget Day – Finance Bill expected to be introduced in Parliament on or after Budget Day.
Main changes since publication of HMRC’s proposals in Autumn 2024:
The focus remains on death benefits under registered pension schemes, and the IHT charge applying on a member’s death on or after 6 April 2027 where death benefits pass otherwise than to the member’s spouse or registered civil partner. There are 2 main changes:
(1) Exclusions from IHT:
The exclusions are defined in more detail:
- Dependants scheme pensions; and
- Death – in – service benefits under schemes where the member dies as an active member.
(2) Responsibility for paying IHT is switched from pension scheme trustees (usually being the scheme administrators) to the personal representatives of the deceased member’s estate (usually the executors named in the member’s Will).
Some issues
- the exclusions from IHT are insufficiently clear;
- the process for paying IHT including IHT apportionment between the member’s free estate and each of the member’s relevant pension arrangements, and liaison between the member’s personal representatives and the scheme death benefit beneficiaries, is cumbersome and may cause delay and other difficulties;
- as originally envisaged, interest runs on unpaid IHT from 6 months after the end of the month of death, at currently 8%; six months is little time to ascertain all the member’s death benefits and select the pension beneficiaries; and
- it seems IHT reliefs for certain agricultural property and business property will not be available for property held in a registered pension scheme pension becoming subject to IHT.
Present Position
HMRC has run further workshops to help shape their thinking.
Hopefully the legislation once finalised will be practical and not cause major dislocation, but to date the omens do not seem good. Such a major structural change is challenging for members, their personal representatives and for scheme trustees as well as for HMRC.
Our long established and highly experienced Pensions and Private Client Teams are available to help.
Meet the team: