On 29 October 2026, the Chartered Institute of Taxation (CIOT) welcomed a legislative amendment to the inheritance tax (IHT) treatment of pension assets that previously created a technical barrier to claiming the reduced 36% IHT rate (applicable when 10% or more of the net estate is left to charity). The change, included in the Finance Bill 2026, ensures that pension lump sums paid to charity qualify for the reduced rate calculation, aligning the rules with policy intent to incentivize charitable bequests.
Key Takeaways
- Barrier to Reduced IHT Rate Removed: Pension death benefits donated to charity now count towards the 10% charitable threshold, enabling estates to benefit from the 36% IHT rate instead of 40%.
- Enhanced Charitable Incentive: The reform is expected to increase legacy giving by simplifying the qualification criteria for the reduced rate.
- Retrospective Application Clarified: The amendment applies to deaths on or after 6 April 2026, providing certainty for estate planning and will drafting.
Disclaimer: This article is compiled and summarized by the AI based on publicly available information and is for general information purposes only. It does not constitute any form of formal tax advice, legal opinion, or basis for performance. Please consult a qualified professional tax advisor or legal counsel for tax advice.
Source: Read Official Announcement