UK Inheritance Tax Rules Impact Pensioners

Chancellor Rachel Reeves' recent Budget has sparked controversy due to significant changes in inheritance tax regulations, particularly affecting pensions, which will be taxed at rates exceeding 90% for families inheriting them from April 2027. This move, described as a 'bear trap' for grieving families, follows a two-year freeze on inheritance tax thresholds, further increasing the financial burden on bereaved relatives. Analysis indicates that these changes could lead to up to £234,000 in additional tax bills for families, especially as the main nil rate band remains unchanged since 2009. Housebuilder Persimmon has reacted negatively to the Budget, warning of a 'squeeze' on profit margins due to increased costs linked to tax rises and new regulations. Stakeholders, including financial experts, warn that the inability to adjust tax thresholds for inflation will disproportionately impact families and encourage retirees to reconsider their savings strategies. As a result, many pensioners may opt to spend their savings rather than pass them on, fearing hefty tax deductions.