UK inheritance tax faces frozen thresholds and pension rule changes

The United Kingdom is facing shifts in inheritance tax (IHT) landscape due to frozen thresholds and upcoming changes to pension taxation. The standard IHT threshold has remained at £325,000 since April 2009 and is scheduled to stay at that level until April 2031. Because property values have significantly increased during this period, more middle-income estates are being pulled into the tax bracket.

Additionally, HM Revenue and Customs (HMRC) has released a technical note regarding how pensions will be taxed as part of inheritance tax starting in April 2027. This note outlines the obligations for personal representatives and executors, including new information-sharing requirements and the necessity of correctly completing IHT accounts and calculations.

While the technical guidance provides clarity on the new processes, experts from STEP have noted that executors will likely face increased pressure to manage these complex administrative requirements following the implementation of the changes.