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STEP urges Treasury to change pension inheritance tax rules before 2027, warning families face debt trap

STEP urges Treasury to change pension inheritance tax rules before 2027, warning families face debt trap

Lawyers and probate professionals are calling for urgent legislative changes to Labour's plan to bring unused pensions within the scope of inheritance tax from April 2027, amid warnings that bereaved families could be forced to take out costly loans to meet tax deadlines. STEP — the Society of Trust and Estate Practitioners — has sent a letter to financial secretary to the Treasury James Murray calling for amendments before the reforms come into force.

Families face a brutal cash-flow trap: inheritance tax must be paid within six months of death, but pension payouts can take up to two years.

HMRC charges interest at 7.75% on unpaid tax after six months — adding nearly £4,000 to a £100,000 bill for every further six-month delay.

STEP warns thousands of families could be blindsided, having planned their estates under the old rules with no idea the change is coming.

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