With major changes to inheritance tax (IHT) incoming from April 2027, many people are beginning to realise that their pensions which currently fall outside the estate, will push them over IHT thresholds.
While everyone’s situation is different, there are several planning options worth considering well ahead of the 2027 deadline – and now is the time to start thinking about this.
1. Reviewing how and when you take pension benefits
Under the current rules, pensions have often been left untouched and passed on to the next generation. If your pension is likely to be included in your estate from next year, it may be sensible to review whether drawing some income or lump sums earlier fits with your wider plans. This isn’t about rushing decisions, but about understanding how your pension interacts with the rest of your estate.
2. Making use of gifting allowances
Gifting can be an effective way to reduce the value of your estate over time. This might include making use of the annual gifting allowance, small gifts, or gifts made from surplus income. These rules can be generous, but they need to be applied carefully and documented properly.
3. Reviewing your Will and estate structure
Changes to IHT rules often highlight issues in existing Wills. It may be time to check whether your Will still reflects your wishes, makes best use of available allowances, and works alongside any pension nominations you have in place.
4. Understanding the allowances
The nil-rate band and residence nil-rate band can make a significant difference, particularly for couples (married or in civil partnership). Understanding how these apply and where they may be lost or tapered is an important part of effective planning.
5. Taking a joined-up view of your finances
Perhaps most importantly, planning works best when pensions, property, savings and investments are considered together. Decisions made in isolation can have unintended tax consequences later on.
Why timing matters
Early action usually means more flexibility, more choice, and fewer rushed decisions.If you’re concerned about how the upcoming changes could affect you, get in touch for a complimentary initial chat about your situation.
Call 0117 3636 212 or email office@haroldstephens.co.uk
