Earlier this year, the government was reportedly discussing the abolition of Inheritance Tax (IHT) in the UK – which is catching more and more bereaved families in its net due to the nil rate band threshold freeze in place until 2028.

While only around 4%
of deaths resulted in an Inheritance Tax bill in 2020–2021, this is expected to increase to 7% by 2032–2033, affecting 1 in 8 people.

The latest reports suggest that the Conservatives are looking to slash the IHT rate in the Spring Budget next March, which could be a prelude to abolishment – but how likely is this to actually happen, and how might it affect you?

How much is IHT?

If a person or couple passes away and the value of their estate exceeds the tax-free allowance, then Inheritance Tax will be due. The nil-rate threshold has been £325,000 for a single person or £650,000
jointly for a couple in a marriage or civil partnership since 2009.

There is also a residence nil rate which came into effect in 2017, adding a further £175,000 per person to the tax-free allowance for residences directly inherited by the spouse, children, or grandchildren of the deceased person.

However, if the total estate value exceeds the available allowances, beneficiaries will be taxed 40% on the excess value of the deceased’s assets.

Why should IHT be abolished?

Considering that investments in assets, especially property, are typically paid for using taxed income, IHT is like a second tax charge on wealth that has already been taxed.

This is one of the main reasons that IHT is a widely despised tax, with many believing it should be abolished – though the fact that it applies to virtually all assets, with few exemptions, also makes it extremely unpopular.

Though wealthier people are more affected by IHT, they are also more likely to be able to reduce the Inheritance Tax
burden for beneficiaries with tax planning measures, such as trusts and lifetime gifts. This may not be possible for moderately wealthy people whose main residence may make up the majority of their estate value.

While abolishing the tax completely is a dramatic move that could lead to increasing tax burdens elsewhere, there are arguments for at least reducing the high 40% tax rate and/or increasing the currently frozen tax-free threshold.

How likely is IHT abolition?

Getting rid of Inheritance Tax could gain the Conservative government some favour ahead of the next General Election, as inflation continues to push more families over frozen tax thresholds during an ongoing cost-of-living crisis.

However, a cut to the tax rate seems more likely than the complete removal of IHT – not least because the lack of revenue from IHT receipts would create a fiscal gap that would need to be filled some other way to keep Britain’s finances on track.

In any case, Inheritance Tax reform is well overdue, so measures such as reducing the levy and reviewing IHT and gift allowances would still be welcome.

We won’t find out about changes to IHT until the next Budget is announced in March 2024, but in the meantime, anyone whose estate is likely to become liable for IHT should look into suitable ways to reduce this liability.

Consult HMRC’s guide to Inheritance Tax on the government website, or speak to a financial adviser like one of our Barnsley accountants, who can assess your financial position and help you with tax planning for the future.

Call gbac on 01226 298 298 or email the team at info@gbac.co.uk
to arrange an IHT planning consultation at a time that suits you.

According to HMRC, around 1.5 million companies paid Corporation Tax in the financial year up to 31st March 2022 – but only 7% of these exceeded the small profits threshold of £50,000 a year.

Though less than 100,000 companies are likely to face the marginal rate of Corporation Tax at 26.5%, which applies to profits between £50,000–£250,000, these will mostly be owner-managed companies keen to mitigate the increased tax.

As an example, a company with year-end profits of £200,000
will have a Corporation Tax bill that’s £11,250 higher this year than the previous year.

One approach that could help company owners to mitigate the impact of this tax increase is a self-invested personal pension or SIPP
– and here’s how.

Director’s SIPP (Self-Invested Personal Pension)

An SIPP is similar to a standard personal pension, as it is a registered pension scheme that allows an individual to save and invest to build up a retirement fund.

The difference is that an SIPP offers a greater choice of investments – including company shares, collective investments, trusts, and sometimes commercial property – which the individual can make changes to whenever they like.

Even if a company director was previously not in favour of sizeable pension contributions, there may now be a strong case for doing so through an SIPP:

• Making the maximum £60,000 investment could save £15,900 on a 26.5% Corporation Tax bill
• The director can withdraw 25% of the pension fund tax-free when they reach 55 years of age
• If the tax eventually paid on withdrawals is lower than 26.5%, there will be an overall tax saving

Income Tax relief is available on SIPP contributions, depending on the individual’s tax band, though there are annual limitations on how much you can contribute and how much tax relief you can claim. SIPPs also affect annual allowances and lifetime allowances.

However, even if there isn’t an overall tax advantage, there is still the benefit of timing – cutting the Corporation Tax bill for the current financial year and deferring the tax cost until the director claims their pension income from their SIPP.

Mitigating cost and risk with an SIPP

Anyone in the UK under 75 years old can start an SIPP
– and there isn’t an age limit for transferring funds from other personal pensions into an SIPP.

If you aren’t sure whether an SIPP would be beneficial for you as a company owner or director, this basic guide to SIPPs could help you to make up your mind.

Annual maintenance costs can be kept to a minimum by choosing a low-cost SIPP provider, and if retirement isn’t that far off, exposure to stock market volatility can also be minimised by investing in fixed-term cash deposits.

SIPPs are typically most suitable for those with an understanding of financial markets, who are prepared to research and actively manage investments responsibly.

Alternatively, you could consult a qualified financial adviser for professional advice on SIPP suitability and investment fund management.

At gbac, our Barnsley accountants can assist with pension and tax planning – call us on 01226 298 298 or email info@gbac.co.uk to set up a consultation and find out more.

Did you know that you don’t have to take your State Pension when you reach State Pension age? The majority of workers may plan to retire as soon as they’re eligible, which is currently at 66 years old, but some may continue to work past this age.

If you put off claiming your State Pension, this means you are deferring it to claim at a later date. It will automatically be deferred if you don’t actively claim it.

Delaying your State Pension claim can be beneficial, as you could end up with a bigger pot and higher payments when you do decide to draw your pension.

However, deferring your State Pension may not be a good idea for everyone, as there are pitfalls to navigate – from tax implications to life expectancies.

Here, we look into what it means to defer a State Pension
and the potential pros and cons you should consider when deciding whether to defer or not.

When can you claim your State Pension?

Under the current system, men born on or after 6th April 1951 and women born on or after 6th April 1953 will be eligible to claim the new State Pension from their 66th birthday. However, the minimum age will increase to 67 years old by April 2028, and may rise another year in the decade after that.

The government should send a letter to eligible citizens at least a couple of months before they reach State Pension age, which will provide details on how to claim.

You must follow this information and make an official claim before you can receive payments – if you don’t, the government will defer them automatically. Your deferred State Pension will then increase every week until you decide to claim it.

To be able to claim the full State Pension, which is currently £10,600 a year, you must have made at least 35 years of qualifying National Insurance contributions. If you won’t have enough by the time you reach the eligible age, you could defer and look into topping up your National Insurance Contributions to boost your pension.

What happens if you defer your State Pension?

If you passively or actively choose not to claim your State Pension from the date you become eligible, your future payments should rise by the time you do claim it. The new amount will depend on how much you are entitled to claim, and how long you delay taking your pension.

You must defer for at least 9 weeks to make a difference to your payments, as new State Pension payments from 2016 will increase by 1% for this period, up to a total of 5.8% a year. This would give you an annual boost of £614.64 if you deferred for a full year, or an extra £11.82 a week – which would apply for the rest of your life.

However, deferring for a year to achieve this would mean giving up the £10,600 you could have claimed that year, so it could take at least 17 years for this extra money to even out, depending on inflation and rising interest rates.

That’s one of the main reasons why deferring State Pensions can be a gamble, as how much more you’ll receive over your retirement after deferring depends on how long you live. If you were to pass away before claiming your deferred State Pension, your beneficiaries would only receive 3 months of payments.

Is it worth deferring your State Pension?

If you intend to continue working and have a steady salary when you pass State Pension age, or have already started taking money from a private pension plan, it could well be worth deferring your state benefit to increase the payments for a later time, when you will likely need them more.

It’s worth noting that your State Pension is considered taxable income if your total earnings exceed your annual Personal Allowance, so claiming while continuing to work could push you into a higher tax bracket and spirit away more of your money.

Of course, higher pension income could later push you over a higher tax threshold, but if you wait until you’re no longer working to claim, you could fall into a lower tax bracket and enjoy more of your increased payments from deferring.

As mentioned, it takes a while to break even and for the 5.8%
extra to really pay off, so the downside is that deferral may not be the best idea if you aren’t in good health.

According to the 2021 Census, the most common age at death was 86.7 years for men and 89.3 years for women, so it’s possible to recoup what you deferred.

However, you should also be aware that you can’t increase your State Pension by deferring if you (or your partner) are receiving certain state benefits. You would therefore only receive the same amount as you would if you hadn’t deferred.

You could also reduce or lose your entitlement to means-tested benefits once you begin to claim your State Pension if the uplift from deferring pushes your income over the allowance for those benefits, such as Pension Credit.

So, if you wish to give up working at State Pension age
but won’t have enough income without it, you may be better off claiming.

Do you need financial planning advice?

The decision to claim or defer your State Pension is obviously a very personal one, and whether it would be beneficial for you or not depends on your individual circumstances, both at present and what can be anticipated in the future.

As many people are living longer and staying in work for longer, deferring for increased payments later can be appealing. However, you do need to make sure you consider all circumstances before committing to this, including tax obligations.

Official guidance on deferring a State Pension
is available on the government website to help you with planning your retirement. If you need more in-depth assistance working out your retirement income and how best to maximise your savings for later in life, it would be best to seek professional financial planning advice.

At gbac, we can provide a range of helpful services, including private pension planning and tax planning, to ensure you get the most out of your savings and your State Pension entitlement when the time comes.

Call our Barnsley accountants on 01226 298 298 or send an email to info@gbac.co.uk
to arrange a consultation and learn more.

This year was the 50th anniversary of the introduction of Value Added Tax (VAT) in the UK, but despite being around for so long, many businesses still find managing this tax too complicated. Unsurprisingly, more registered businesses than ever are now receiving penalties from HMRC for inaccuracies in their VAT returns.

A new VAT penalty system for submitting returns or paying tax bills late came into force on 1st January 2023, replacing the old regime and also applying to nil or repayment returns. HMRC is now issuing correspondence to businesses that have incurred VAT penalties under the new system – some of which may not be aware of their errors.

Frozen thresholds and inflation

The two primary factors that may be leading to businesses failing to meet their VAT obligations are high inflation rates and frozen tax thresholds. The registration threshold for VAT has stayed the same since 2017, so increased prices could push businesses over the £85,000 annual turnover threshold even if they haven’t grown in size.

This threshold is due to remain frozen until 2026, with more and more businesses expected to become liable for VAT over this time, even if inflation drops to 2%
by 2025. As this is predicted to raise an additional £1.4 billion in tax revenue by 2028, it’s essential for businesses to stay on top of their VAT liabilities to avoid penalties.

Similarly, the annual income thresholds for accounting methods have stayed the same for over a decade. Though the government announced intentions to adjust the cash basis scheme earlier this year, in the meantime, it’s very easy for businesses to mistakenly continue using the wrong accounting scheme for their income bracket.

Beware VAT penalties

With HMRC aiming to increase VAT revenue and shrink the tax gap, the risk of small businesses being penalised for VAT
inaccuracies will only get higher. The tax agency expects businesses to take responsibility for their own tax liabilities, and seek appropriate guidance if there is something they are unfamiliar with.

The new scheme introduced this past January runs a point-based penalty system for late VAT submissions and a percentage penalty system for late VAT payments. This can lead to a £200 penalty for not submitting returns on time, or up to 4% of the outstanding balance for an overdue tax bill (plus interest at the Bank of England rate +2.5% – currently 7.75%).

There are also fines of £100–£400 for failing to keep records and submit returns electronically through the Making Tax Digital
online portal, and penalties of £5–£15 a day until the digital records are updated. Online digital submissions have been compulsory for VAT
since November 2022, so HMRC is likely to be sceptical of excuses.

Additionally, should you make any errors in your VAT return, and HMRC believes this was a result of carelessness, you could receive a significant penalty. This could be up to 30% of the outstanding tax for lack of reasonable care, up to 70% for deliberate error, or up to 100% for a deliberate error that was also deliberately concealed.

Get help with VAT returns

To avoid incurring any of these penalties, you must be sure to submit complete and accurate VAT returns on or before the annual deadline, using Making Tax Digital compatible software (unless you have been granted an exemption by HMRC).

As this is the first year of implementing the new system, HMRC
may be willing to be more lenient towards genuine VAT errors – as long as these issues are corrected and any outstanding tax is paid as soon as possible.

The tax agency also has the discretion to suspend a VAT penalty for up to 2 years, after which it could be cancelled if the business has complied with specified conditions during this period, such as improved record-keeping.

Of course, it’s best to prevent this scenario from occurring by keeping accurate VAT records and submitting returns on time in the first place. If your business has trouble with this, you could use professional assistance with VAT management.

Here at gbac, we have a team of accountants in Barnsley that includes expert tax consultants. To arrange a bookkeeping and VAT consultation, give us a call on 01226 298 298, or email an enquiry to info@gbac.co.uk
and we will be in touch.

Since its introduction over 20 years ago, Research and Development (R&D) tax relief has helped to stimulate economic growth and boost employment by encouraging companies in the UK to pursue innovative investments.

However, there has been some concern that the level of exaggerated or fraudulent R&D relief claims is increasing. It’s believed that almost 20% of all claims are fraudulent, with non-compliance being a particular issue for small-value claims of £10,000
or less.

To counter dishonest applications, HMRC has introduced changes in the way companies must apply for R&D tax relief. To submit a claim, companies must complete another form in advance and provide extra information.

Additional information required for R&D forms

Any R&D claims submitted to HMRC for accounting periods starting on or after 1st April 2023 must be preceded by a claim notification. This additional form requires more information when reporting projects, qualifying expenditure, and company details.

Companies must submit the supplementary form before
filing their Corporation Tax return, as HMRC will simply remove the R&D relief claim from their tax return if the company files it without providing the additional required information first.

This must be submitted through an online portal – HMRC accepts digital submissions only, allowing the tax agency to process claims and check their validity much faster.

Claimants must supply much more expansive and detailed information than before to support their R&D tax relief submission. This includes VAT registration, Unique Taxpayer Reference (UTR), and PAYE reference numbers, the contact details of internal personnel involved, and technical breakdowns of qualifying R&D projects.

The latter requires in-depth reports of all direct and indirect R&D activities within the fiscal year, including answering specific questions about the scientific or technological field invested in, the baseline of planned advancements, and cost breakdowns.

Increasing the level of accountability expected from companies applying for R&D tax relief should help to prevent misuse of the scheme and make the process more streamlined, but it could take some adjusting for companies and their accountants.

Get help with submitting R&D tax relief forms

While a considerable amount of extra effort is needed to supply all the additional information required by HMRC, this enhanced measure should help to sift out fraudulent applicants, or those who haven’t provided enough detail about their R&D projects.

Complying with the more complex new rules could still be challenging for small-to-medium enterprises (SMEs) whose financial representatives may lack technical expertise about R&D. Those who aren’t prepared for the changes risk submitting inaccurate or incomplete information that could compromise the success of their claim.

Therefore, it’s a good idea for companies who plan to claim R&D tax relief to begin preparing as soon as possible. Keeping robust records and starting the process well in advance should ensure that the required information is readily available, and there isn’t a rush to complete the time-consuming form that could result in costly mistakes.

An easier way to ensure that your company is fully compliant with the latest requirements from HMRC and can secure the highest level of tax relief possible is to speak to a tax specialist. Here at gbac, our tax consultants can use our years of expertise in communicating with HMRC to make sure your R&D tax relief claim complies.

To learn more, get in touch with our Barnsley accountants
by ringing us on 01226 298 298 or emailing your enquiry to info@gbac.co.uk today.

On 3rd August 2023, the Bank of England increased the base interest rate from 5% to 5.25%, which also triggered an increase in HMRC interest rates for late tax payments and repayments. This rate will apply until the next review in November.

Increased bank interest rates mean increased tax revenue for the government, as more taxpayers will end up paying Income Tax on their savings because of the higher interest. Similarly, increased mortgage rates are driving up Capital Gains Tax takings.

What is the Income Tax impact of savings?

Currently, the personal savings allowance for annual interest earned on savings is £1,000 for basic rate taxpayers, which drops to £500 for higher rate taxpayers. There is no exemption for savings interest earned by additional rate taxpayers.

With many financial institutions offering up to 5–6%
annual interest rates for their savings and investment accounts, it would be easy for a higher rate taxpayer with savings of £10,000 or more to exceed their allowance and incur an unexpected tax bill.

This could mean that up to a million more people will end up paying tax on their savings interest income for 2023–2024 than the previous tax year.

If you could be at risk of paying more tax due to interest rate increases pushing up your savings income, there are a few things you could do to try and minimise your tax liabilities. For example, you could invest up to £20,000 a year in an ISA.

Alternatively, you could invest in premium bonds, though these do not pay fixed interest. You could win monthly tax-free prizes on these, but must be prepared to make little to no return, as this is always a risk with this type of bond agreement.

Why is Capital Gains Tax revenue increasing?

A recent rise in Capital Gains Tax (CGT) receipts has at least partly come from a surge of buy-to-let landlords deciding to sell up, pushed by uncertainty over the future of CGT.

Buy-to-let properties were a good choice when property prices were rising, mortgage costs were low, and cash savings accounts didn’t offer as much of a return. Now, these factors have reversed, with landlords preferring to try their luck by investing funds elsewhere.

Landlords who are selling up should take steps to reduce their CGT bills, such as:

• Claiming any qualifying expenditure
• Disposing of any investments standing at a loss
• Moving property into joint ownership with a spouse

These measures can alleviate some of the more punishing aspects of CGT charges.

Get tax advice from GBAC

It’s important to keep track of your savings income in consideration of your tax liabilities – if you owe tax on savings interest, this must be paid through a Self-Assessment
submission or deducted from your income through a PAYE tax code adjustment.

You can find more information about tax on savings interest on the government website. If you’re still unsure of whether you owe such tax or not and don’t want to wait to receive a letter from HMRC, you can always contact gbac for guidance.

Our team of accountants in Barnsley includes tax consultants
who can help you organise your financial accounts and provide professional tax advice.

To find out how gbac can help you reduce your tax liabilities while remaining fully compliant with HMRC, get in touch by calling 01226 298 298 or emailing info@gbac.co.uk.

Taxpayers who submitted 2021–2022 tax returns with provisional figures need to resolve these and provide the final figures by the end of November.

HMRC has been sending nudge letters to tax agents representing taxpayers whose provisional tax returns are still unresolved, and may also send them directly to unrepresented taxpayers who do not have an agent to manage their tax files.

While using provisional figures is sometimes necessary, submitting a high number of provisional tax returns can draw unwanted attention from HMRC, and leaving them unresolved could result in fines for failing to meet your tax obligations.

That’s why HMRC is also encouraging taxpayers and tax agents to get ahead by submitting 2022–2023 tax returns early – preferably with finalised figures.

Deadline for amending provisional figures

While an estimated figure is used as final when a more accurate figure cannot be provided, a provisional figure is a temporary placeholder for a more accurate final figure that should be submitted later when more information is available.

HMRC will be aware if your tax return contains provisional figures that are due to be amended, as you should have checked the relevant box when submitting it.

The tax authority is now requesting that those needing to update provisional figures should do so well ahead of the statutory deadline, which is 31st January 2024.

If you now have the actual figures to hand, you should submit an amended tax return by 30th November 2023. If you have yet to source the figures, you should aim to find them as soon as possible and submit them by 31st December 2023.

Should the missing figures be too old and impossible to obtain, it would be necessary to confirm to HMRC that the provisional figures are final.

These deadlines are not statutory, which means it is not compulsory to take action by these dates and you will not be penalised for missing them.

However, HMRC recommends taking action now to get ahead, giving more time to prepare your next return before the statutory deadline for 2022–2023 tax returns, which is also 31st January 2024.

File your next tax return early

Nobody wants to stress over filing last-minute tax returns, but it happens to many every year when workloads get heavier and record-keeping isn’t what it should be.

Getting your accounts in order and filing as early as possible will give you more free time to focus on business in the new year and ensures that you avoid a whole host of problems that can come with late or inaccurate tax return submissions.

Filing your 2022–2023 tax return sooner offers the benefits of establishing tax liabilities early enough to enable more accurate financial planning, receiving any tax refunds owed earlier, and allowing you to use a HMRC payment plan if you cannot pay your tax bill in full.

Guidance on Self-Assessment Tax Returns is available on the government website – or you can consult professional tax advisers like gbac for assistance with managing your accounts and submitting final tax returns.

Contact our Barnsley accountants by calling 01226 298 298 or sending an email to info@gbac.co.uk
to enquire about our tax consultancy services.

Recently, HMRC released new Income Tax liability statistics covering the tax years 2020 to 2021 and 2023 to 2024 – but what do the latest figures mean?

The table below lists the average Income Tax rate for the main taxpayer categories, showing the average percentage of income paid in tax by marginal rate in 2020 and the projected percentage for the current tax year.

These numbers project a 0.4% increase for basic rate taxpayers, but decreases of 1% and 0.3% for higher rate and additional rate taxpayers respectively.

At first glance, this seems like good news for higher and additional rate taxpayers, but it doesn’t necessarily mean that people are actually paying less tax.

What’s the story behind the Income Tax numbers?

HMRC’s explanation for these differences is the simple statement that average tax rates vary over time depending on taxpayer numbers, both overall and in each tax band, in addition to income growth and changes to thresholds and allowances.

Realistically, the average for basic rate taxpayers has increased because average weekly earnings have increased since 2020, while the tax-free Personal Allowance
has barely risen at all, pushing more earners into the basic rate band.

When it comes to the decreasing average for higher rate taxpayers, HMRC did not mention in their summary that the upper threshold for this tax band was higher in 2020. It has now dropped from £150,000 to £125,140, so those at the higher end were pushed into the additional rate band.

The lower starting point for the additional rate tax band means there are around twice as many taxpayers in this bracket than before, with those at the lower end pulling down the average due to their lower incomes.

With the Office for Budget Responsibility forecasting around 3.5 million people moving into a higher Income Tax band between 2023 and 2028 due to threshold and allowance freezes, it’s important to make sure you know what your tax liabilities are and how changing rates could affect you.

Do you need professional tax advice?

Do you know which tax band you fall into for the current tax year, and whether income changes could affect your tax liability? Do you have any concerns about your tax code?

If you need guidance on reviewing your tax situation and managing your liabilities, you can consult with our tax advisers at gbac. Our friendly team of accountants in Barnsley could help you to maximise your tax savings while maintaining compliance.

Contact us by phone on 01226 298 298 or send an email to info@gbac.co.uk to enquire about our financial services.

The Lifetime Allowance (LTA) was introduced over fifteen years ago, setting the maximum amount of pension savings that an individual could contribute to registered pension schemes before their savings would be subject to a tax charge.

As part of efforts to incentivise those who have retired or are planning to retire to return to work and boost the economy, the government has abolished this allowance – meaning workers can save more into their pensions without triggering the tax charge.

Though the LTA was scrapped in April this year, further changes were needed to support its removal and facilitate the taxing of lump sums and death benefits without it.

To this end, draft legislation and an accompanying policy paper have been published to set out the changes due to take effect from 6th April 2024. These include the introduction of a new lump sum allowance and death benefit allowance.

If the legislation is enacted, these will be the same as the previous LTA – which was frozen at £1,073,100 in 2020. There will also be significant changes to the taxing of death benefits when a pension saver passes away before they turn 75 years old.

Here is what we can learn from the policy document and how abolishing the LTA could affect the future of pension planning for many savers.

Lump sum death benefits

A beneficiary can typically receive tax-free lump sum death benefits if the deceased saver did not access the pension yet (known as uncrystallised benefits).

While the LTA has been removed, there will still be a cap to limit the amount that can be taken as a tax-free lump sum – which is set at the same level as the LTA.

The allowance is combined for tax-free lump sums and death benefits, meaning the amount available for a lump sum death benefit would be reduced by any tax-free lump sums the pension saver may have taken during their lifetime.

Before the LTA was scrapped, any excess over the £1,073,100
cap would be taxed at a high rate (55%). From next April, excess will be taxed at the beneficiary’s marginal tax rate. This means their Income Tax
rate will apply, which is likely to be much lower.

Whether lump sum death benefits were paid from crystallised or uncrystallised funds will no longer matter, as both count towards the lump sum allowance.

When there is more than one beneficiary, the allowance will be allocated between them to determine each beneficiary’s tax liability.

Income death benefits

The policy paper also proposes a new approach to taxing uncrystallised death benefits taken as income, either from a drawdown fund or annuity, which was not announced with the initial news about abolishing the LTA.

Previously, pension income was exempt from tax, as a drawdown arrangement would be a ‘benefit crystallisation event’ under the LTA, and the charge would not apply to funds received by beneficiaries within two years of the saver’s death under 75.

Now, it seems that withdrawals from a drawdown scheme inherited from a saver who passes away before 75 will no longer be tax-free from next April, with such pension income also becoming taxable at the beneficiary’s marginal tax rate.

As lump sums taken from the same uncrystallised funds would be completely tax-free if the amount was lower than the lump sum and death benefit allowance, this could push beneficiaries into choosing to take a lump sum even if income would have been a more suitable option for their needs.

We will have to await further information to find out whether this will also apply to death benefits from crystallised pension funds.

How will this affect your pension?

The policy paper on abolishing the lifetime allowance is available to read on the government website. As the legislation is still in the draft stages, further changes may be made before it is implemented in 2024 to 2025.

It will be essential for anyone who may be affected, including savers and their potential beneficiaries, to keep up with the latest developments as the legislation is finalised. Reviewing individual pension plans and protection levels is vital.

Regardless of the level of your pension funds, it’s a good idea to consult with a financial advisor to make informed decisions about what’s best for your retirement plans and for your beneficiaries in the event of your death.

If you would like to get ahead and maximise your pension planning, get in touch with gbac to discuss your options with our accountants in Barnsley.

You can call us on 01226 298 298 or email info@gbac.co.uk to get started.