Welcome to the August 2025 Newsletter from Beatons Group
From April 2027 the government will charge Inheritance Tax (IHT) on unused pension pots and death benefits. The government's stated policy objective is to 'remove distortions which have led to pension schemes being increasingly used and marketed as a tax planning vehicle to transfer wealth rather than for funding retirement'.
IHT to be charged on unused pension pots from 2027
The government will charge IHT on unused pension pots and death benefits from April 2027.
Personal representatives will be liable for reporting and paying any IHT due on unused pension funds and death benefits.
The government said that, at present, individuals can accumulate unlimited tax-free savings in their pension, draw on other means to fund their retirement and leave their unused pension assets to be inherited by beneficiaries without any IHT charge.
The measure will help reform IHT and 'deliver a fairer, less economically distortive tax treatment of inherited wealth and assets', according to the government.
Steve Webb, a former Pensions Minister, commented: 'Life is tough enough when you have just lost a loved one without having extra layers of bureaucracy on top.
'In future, the person dealing with the estate will need to track down all of the pensions held by the deceased which may have any balances in them, contact the schemes, collate all the information and put it into an online calculator and then work out and pay the IHT bill.'
IN THE NEWS
IFS calls for 'decisive action' to future-proof pension system
The Institute for Fiscal Studies (IFS) has called for the government to take 'decisive action' to ensure the pension system is future-proofed for the next generation.
Click here for the full story
Government urged to 'harness optimism to grow economy'
The British Chambers of Commerce (BCC) has called on the government to harness retail investor optimism to help grow the UK economy.
Click here for the full story
Government publishes Finance Bill supporting documents
The government recently published draft legislation for Finance Bill 2025-26 for consultation.
Click here for the full story
International companies 'underpaid £8.8 billion in tax'
HMRC estimates that US firms underpaid £8.8 billion in taxes in 2024.
Click here for the full story
Recruitment static as firms assess NICs impact
Recruitment at UK firms remained static in the second quarter of 2025 as businesses continued to assess the impact of the rise in employer National Insurance contributions (NICs), says the British Chambers of Commerce (BCC).
Click here for the full story
ESSENTIAL TAX DATES FOR AUGUST
2 August
Deadline for submitting P46(Car) for employees whose car/fuel benefits changed during the quarter to 5 July 2025.
19 August
PAYE, Student loan and CIS deductions are due for the month to 5 August 2025.
QUOTE OF THE MONTH
'Without decisive action, too many of today's working-age population face lower living standards and greater financial insecurity through their retirement.'
Paul Johnson, Director of the IFS, commenting on the need to future-proof the UK pension system.
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