Charity donations and pension changes to reshape inheritance tax landscape

Summarised from 2 outlets · 3 reports · Updated 29 Oct, 15:25 · Archive

Inheritance tax receipts are expected to surge as pensions become liable to death duties from April 2027 and property values continue rising.

Inheritance tax receipts are set to surge significantly in the coming years. The Office for Budget Responsibility predicts IHT receipts will rise from £9 billion this financial year to £15 billion by 2031-32, representing a 66 per cent increase. HM Revenue & Customs collected £8.5 billion in IHT in the last tax year, up from £5.3 billion five years earlier.

A major driver of this increase is the change coming in April 2027, when pensions will be counted as part of estates and liable to death duties for the first time. The Institute for Fiscal Studies predicts that by 2032 one in eight people will trigger an IHT bill. Additionally, the nil-rate band of £325,000 has been frozen until April 2031, meaning more households will fall into scope for inheritance tax as property prices rise.

Experts recommend planning ahead to reduce the tax burden on families. Marianna Hunt of Fidelity notes that giving money to charity 'can be a powerful way of supporting the causes you care about while potentially reducing the tax paid on your estate'. Ian Dyall of Evelyn Partners warns that the scope of IHT will 'increase dramatically from next April', leaving families with greater tax burdens.

Charity donations and pension changes to reshape inheritance tax landscape — Image: This is Money

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How it is being reported

Labour's inheritance tax take will surge 66% to £15bn within five years and average bill to rise by £34,000John Healey was silent on inheritance tax in this week's Budget. But do not be fooled. More households will have to pay inheritance tax in the coming years.This is Money · 29 Oct, 15:05
‘Stealth inheritance tax’ to hit savers – how to protect yourselfSavers will soon get hit by a tax rate of up to 49 per cent on their interest - which could hit those who inherit large lump sums from family membersThe i Paper · 28 Oct, 17:58
The little-known way to save more than £40,000 on your inheritance tax bill: How increasing your charity donations could reduce the burden you leave on your familyThe number of families that are caught in the inheritance tax next is expected to spike in the coming years due to a crucial change in the rules.This is Money · 27 Oct, 17:12

In this story: Institute for Fiscal Studies · Office for Budget Responsibility · Fidelity · Evelyn Partners · HM Revenue & Customs

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