Around 8.5 million people remain unaware of new rules that will subject pensions to inheritance tax (IHT) starting in April 2027, according to financial service provider Canada Life.
The lack of awareness persists despite the Government’s announcement in October’s Autumn Budget, which is expected to nearly double the number of estates liable for IHT. By 2030, almost one in ten estates could be captured by the tax, generating an estimated £1.46 billion for the Treasury in the 2029/2030 tax year.
Canada Life’s research found that only 6% of Britons have adjusted their financial plans in response to the changes. Of those aged 55 or older, a third are unaware of existing gifting rules that could help reduce IHT liabilities.
For those who are aware and have already taken action, 57% plan to spend more of their savings, 41% intend to gift more, and 38% plan to withdraw lump sums from their pensions. Additionally, one in ten views marriage as a strategy to transfer wealth tax-free to a partner.
The research also highlights a widespread lack of knowledge about gifting rules:
- Nearly eight in ten Britons are unaware they can give gifts of up to £250 per person annually to an unlimited number of individuals without incurring IHT.
- The same proportion is unaware that gifts made from income are exempt from IHT.
- Almost seven in ten do not know that gifts between spouses or civil partners are IHT-free.
- Half of those surveyed are unaware of the “seven-year rule,” which exempts financial gifts if the donor lives for at least seven years after making them.
- Nine out of ten were unaware that unused Annual Exemption allowances, which let individuals give away up to £3,000 annually without it being added to their taxable estate, can be carried forward to the next tax year.
Stacey Love, a tax and estate planning specialist at Canada Life, emphasised the need for proactive planning, she said:
“Although it seems like a long time away, many people may not yet realise that these changes could draw them into the inheritance tax net or could mean loved ones paying a higher amount on their estate.”
