The British government is mulling over a new tax proposal that could impact those inheriting pension pots. If implemented, this move would significantly shift the country's approach to inherited wealth, particularly in the realm of pensions ...
The proposed tax would apply to anyone with an income of at least £12,570 a year, which is the current personal allowance. This means that a significant portion of the population could be impacted by this change. If you're earning above this threshold and stand to inherit a pension in the future, it's crucial to be aware of the potential tax implications.
While the proposal might seem daunting, there are some nuances to consider. Beneficiaries can still take up to 25% of an inherited pension as a lump sum tax-free, provided it doesn't exceed the cap of £1,073,100. However, if the pension remains invested and is drawn as an income, it will be taxed at the beneficiary's income tax rate.
To put things into perspective, anyone who had previously inherited a pension would have been liable for an average income tax of £13,693 last year if this levy had been in place. Moreover, this figure could surge to £30,809 if beneficiaries find themselves in a higher tax bracket due to the inherited pension.
While the proposal is still under consideration, it's essential for individuals to be proactive in their financial planning. If you're likely to inherit a pension or are planning to pass on your pension to a loved one, it might be worth seeking expert advice to navigate the potential tax implications!
The government's new tax proposal on inherited pensions is a testament to the ever-evolving financial landscape of the UK. While it's essential to stay informed and prepared, it's equally crucial to remember that with the right planning and advice, you can navigate these changes effectively.
If you feel inspired to find out more about anything I've said here, do call me on 01908 774320 or leave a comment below and I'll be in touch as soon as I can.