As you will be aware the Budget was announced on 30 October 2024. The Budget did not include changes to tax relief or introduce a new limit on tax-free cash on retirement (about which there had been much speculation).
However, it did deliver an announcement that affects the LGPS around Inheritance tax on pensions.
The Government has launched a consultation on Inheritance tax on pensions, liability, reporting and payment.
The proposed changes would mean that:
- LGPS death grants would be subject to Inheritance Tax from April 2027
- Personal representatives would calculate whether any Inheritance Tax was due, and pass on the relevant information to the pension scheme administrator
- Administering authorities would be responsible for paying and reporting to HMRC any Inheritance Tax deducted from an LGPS death grant.
The consultation closes on 22 January 2025 and of course any changes to the regulations as a result of this consultation will be communicated to our members and employers accordingly.