The Government’s inheritance tax (IHT) raid on pensions is facing doubts, as experts warn the timeline for implementation may be unrealistic.
Despite plans to introduce sweeping changes, including taxing unused pensions as part of estates, concerns are growing that the reforms will be delayed.
With no draft legislation yet published and key details still unclear, critics argue that the Government is overpromising on a complex overhaul that could take years to implement.
Some are urging caution, warning that rushing to adjust financial plans now could be premature if the reforms don’t materialise on schedule.
Steve Bish, founder of S Bish Estate Planning said: “With the Government announcing changes to inheritance tax, it’s natural that many people are wondering whether they need to rewrite their Will. But right now I’m advising my clients to ‘do nothing’.”
With Free Wills Month underway, Britons are urged to be cautious before rewriting or altering their Wills due to proposed inheritance tax changes.
For those who are looking for tax efficient ways to pass on wealth, Bish explained to GB News that there are traditional ways to cut one’s bill that can be considered.
Reeves’ inheritance tax raid on pensions could face major delays
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From April 6, 2026, IHT rules on business and agricultural assets will change, introducing a new £1million allowance.
However, the bigger impact is expected to come from proposed pension tax changes, set to take effect a year later, in April 2027.
Currently, unused pensions are passed on tax-free, but under the new plans, any pension savings exceeding the £325,000 IHT threshold could be taxed as part of the estate.
Despite the Government’s proposed timeline, Bish has raised doubts about whether the changes will happen as planned.
He said: “Personally, I’ll be surprised if the government implements these changes in the timescale they’ve given. Writing and passing legislation is a technical and time-consuming process, so I expect them to push back the date from the proposed April 2027.”
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Bish advised that while it may be tempting to rush through changes to an estate, it is better to wait until the proposed reforms are officially enacted into law.
He also reassured that key elements of the tax system will remain unchanged, including the spousal exemption, which allows married couples and civil partners to transfer assets tax-free on first death.
“No inheritance tax will be due on anything left to a spouse or civil partner,” he added.
Other IHT rules also remain the same, with the £325,000 tax-free allowance and the £175,000 residence nil-rate band for estates under £2 million frozen until April 2030. After this, the IHT rate remains at 40 per cent.
Bish highlighted that Britons can still use these unchanged rules to reduce their tax liability, stating that the spousal exemption helps “maximise their asset base for inheritance planning.”
Under the new plans, any pension savings exceeding the £325,000 IHT threshold could be taxed as part of the estate
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He also advises considering lifetime gifting, as it can “reduce the size of your estate and remove assets from potentially being subject to inheritance tax at a later date.”
However, he warns that “you’re only able to make certain sized gifts,” making professional guidance essential.
Another strategy to lower inheritance tax liability is donating to charities, which can “reduce your IHT bill from 40 per cent to 36 per cent.”
While this may not suit everyone, it can help “lower the estate’s tax burden while supporting a good cause.”
Bish emphasises that “understanding your options and making informed decisions about inheritance tax can be challenging,” urging individuals to seek professional advice to ensure they plan effectively.
One of the biggest concerns being raised is how the proposed pension tax changes will impact retirees and beneficiaries.
Currently, pensions have been used as an effective way to pass on wealth tax-free, but if these reforms go ahead, more estates could face unexpected tax bills.
Bish said: “If these changes do go ahead as planned, we’ll likely see pensions being used more for retirement income rather than as a wealth transfer tool.”
Bish has raised doubts about whether the changes will happen as planned
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Another major issue is the lack of clarity on whether further tax thresholds or exemptions will be introduced. Bish emphasised the importance of waiting for the full details before taking action.
He added: “We don’t have sight of any draft legislation yet, and there’s been no feedback from consultation exercises. I anticipate we’ll only see the draft when the 2026 Finance Bill is published.”
Bish advises people to stay informed about any announcements regarding potential changes.
“There is some speculation that there may be changes made to the seven year window for potentially exempt transfers.
“I will be closely watching the Spring Statement on March 26 to see if new measures are announced.”
However, he reiterated his main advice: “The most important advice I can give is to hold off until we know what ends up in the small print.”