UK Pension Tax on Death Benefits Proposed Change
On 18th July the UK government announced a consultation on pension taxation linked to the abolition of the Lifetime Allowance. It also considers other aspects of tax linked to pensions and proposes a significant change. Currently where pension member dies before age 75, benefits received by a beneficiary are generally outside the scope of income tax.
Under the new proposals lump sums and lump sum death benefits would be tested against a new threshold, which is the same as the outgoing Lifetime Allowance of £1,073,100. The threshold will include any lump sums previously paid out to deceased’s members and is tested at individual beneficiary level rather than individual schemes. This means that in scope beneficiaries could be subject to tax on benefits which are currently tax free.
If implemented the change will take place from 6 April 2024.
Further information can be found on HMRC website.
