You need to distinguish between income derived from the asset and the asset itself. The secret is in the name! A capital pot can be used to generate income, or drawn down. The IHT is needed to just stop people drawing down to avoid tax.
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Not in this case. The income drawn from the asset is (or usually is, unless the pot is very large or the income taken very small) reducing the value of the asset.
aug 19, 2025, 10:55 am • 0 0 • view
If you are going to charge IHT, the beneficiary should then be able to access it without further taxation.
aug 19, 2025, 10:56 am • 0 0 • view
Without getting into the "is double taxation always unfair?" argument the distinction here is that pensions have received income tax relief on the way in. So it's not the same as a pot of cash savings that have already been taxed and there's no reason that IHT should "frank" the income tax liability
aug 19, 2025, 5:26 pm • 1 0 • view
That’s an excellent point. I still think it’s a silly idea for the main reason that it will encourage pensioners to withdraw and spend more than they should to avoid the taxman getting hold of any, leaving them destitute in older age if they outlive their pots.
aug 19, 2025, 10:07 pm • 0 0 • view
It seems unlikely; even in situations where the strong advice is that giving more away is the best way of reducing tax exposure, wealthy pensioners will invariably hold onto more “just to be on the safe side” (and by definition we are talking about wealthy people here).
aug 19, 2025, 10:31 pm • 0 0 • view
If we are talking about people in the south east who own a house, then their pension pot doesn’t need to be very big, and their standard of living does not need to be much more than basic, for this to affect them.
aug 20, 2025, 10:47 am • 0 0 • view
For it to affect a married couple owning an average house in the SE (value c.£450k) they would need to have savings plus "excess" pension - i.e. pension that they don't draw/annuitise etc - of £550k before it becomes an issue. And then IHT is only on the excess.
aug 20, 2025, 10:51 am • 0 0 • view
550k gets you a 20k a year pension at the recommended 4% withdrawal rate. They aren’t living like kings.
aug 20, 2025, 12:02 pm • 0 0 • view
But at that level they also won't have any IHT exposure - and on average you are looking at the fund level after 10+ years of withdrawal, not the "peak" value before drawdown. The peak fund value you would need to have to expect to have a death estate subject to IHT is a lot more than £550k.
aug 20, 2025, 12:15 pm • 0 0 • view
25k then. The avarice.
aug 20, 2025, 12:19 pm • 0 0 • view
Well the fair way to do it is a one off IHT charge on the asset transfer, then income tax on the interest generated by the residual asset thereafter. I fundamentally disagree that anyone should get unearned assets or income tax free just by virtue of their parents endeavours.
aug 19, 2025, 11:32 am • 0 0 • view