'Cruel' blow as taxman 'digs deeper in pockets of grieving'

HUNDREDS of thousands more grieving families will be forced to pay inheritance tax after Rachel Reeves yesterday announced private pensions will be subject to the levy.

- Martyn Brown

Campaigners slammed the Chancellor for the "cruel" blow which they warned could cost bereaved families around £65,000.

The hammerblow was one of three changes to the hated "death tax".

They also included extending the IHT personal allowance threshold until 2030 and potentially crippling agricultural and business relief reforms for farmers.

At the moment, someone inheriting a private pension from someone who died at 75 or over would have to pay income tax. If they were under 75, there is no tax payable.

But the Chancellor's changes mean someone earning £50,000 who inherits a typical £100,000 pension from a loved one will pay £40,000 in inheritance tax from 2027, if they have used up their IHT allowance.

Savings

They will also pay £25,946 in income tax once the remainder of the inherited pension is combined with their income for that year.

The average pension pot for a 55-to 64-year-old is £107,300, according to the Office for National Statistics.

Delivering her Budget in the House of Commons, Ms Reeves said: "Only 6% of estates will pay inheritance tax this year.