The UK tax system is getting more complex for families who lost their loved ones - in about two-and-half years pensions will be part of inheritance tax calculations (something that hasnt been done since 2015)
Rachel Reeves‚ the Chancellor made this change as part of her £40bn tax plan. The new rules mean families will need to pay 40% tax on their relatives pension savings which are now tax-free; this will affect way more people than before - from 5% to 8‚5% of all estates
The paper-work nightmare is real: bereaved relatives will have to do lots of things - find all pension accounts contact each one separately and figure-out tax amounts by themselves. Plus theyʼll need to wait up-to 6 months to get any money
- Track every pension account
- Talk to each pension company
- Calculate taxes for each pot
- Wait for HMRC to process everything
- Deal with possible refunds
The whole thing could turn into a bureaucratic nightmare for grieving families
Its even more tricky because about 4‚8 million pension accounts are “lost“ in the UK right now. Becky OʼConnor from PensionBee points out that finding these accounts is super-hard: people move jobs change addresses and documents get lost
The changes also affect death-in-service benefits (money paid when someone dies while working) - Claire Trott from St Jamesʼs Place says some families might end up paying more tax than they expect because these benefits are part of work pensions