Pensions & IHT

The Chancellor's Autumn Budget has introduced several major changes, with significant implications for pensions, especially concerning inheritance tax (IHT) planning, which will take effect from 6th of April 2027. These changes, subject to several years of consultations, will reshape how some individuals approach retirement planning, with new provisions that may make it more advantageous to utilise pension assets during one's lifetime. 

A notable aspect of the budget is the introduction of stricter IHT rules. Historically, pensions have often provided a tax-efficient means of passing wealth to beneficiaries, as pension assets could typically be transferred without incurring inheritance tax upon the policyholder's death. However, the new budget imposes a significant policy shift, meaning that (subject to consultation) pensions will not be sheltered from IHT, as in previous years. This change could impact high-net-worth individuals and retirees who have been considering pension funds as a tool for legacy planning. 

Given these developments, individuals may find it increasingly prudent to access more of their pension savings during their lifetimes in order to maximise the financial benefit of these funds for themselves and their beneficiaries. The revised approach to pensions and inheritance tax underscores the importance of strategic planning. Consulting a financial adviser to understand the impact of these changes on personal circumstances could be a wise step, particularly for those with substantial pension savings. This shift in policy highlights the government’s focus on rebalancing the tax landscape and ‘levelling-up’, and means it is more important than ever for individuals to think carefully about how and when to utilise their retirement assets, and their wider estate planning strategy. Although the government has clearly set out to remove many existing tax-advantageous avenues for wealthy individuals, there are still several options available to mitigate tax and plan for your family’s future.

Employer's National Insurance (NI)

From 6 April 2025: Employers will face changes in National Insurance contributions. The threshold for employer contributions will be adjusted, potentially increasing payroll costs for businesses. The rate of employers’ NICs will rise by 1.2 percentage points to 15% and the level at which employers start paying NICs for each employee will fall from £9,100 to £5,000. This was the single largest tax raising measure and will be a significant additional cost to private sector employers going forward.