In its first year in office, the Labour government has introduced a range of tax-raising measures under Chancellor Rachel Reeves. While some, like higher stamp duty on second homes, enjoy public support (48%), others have been widely criticised, especially the plan to include unused pension assets in inheritance tax (IHT) from April 2027.
Polling by AJ Bell and Opinium shows just 21% support for the pension IHT proposal, with 44% opposed. Critics warn it could result in double taxation, up to a 64% effective rate for higher-rate taxpayers and cause delays and complexity for bereaved families. Executors would need to identify all pension schemes, allocate the IHT nil-rate band, and potentially deal with illiquid assets, all within a six-month window.
AJ Bell argues the policy will create financial and administrative burdens and has urged the Chancellor to consider alternatives. Suggested options include treating pensions like ISAs, which are already subject to IHT, or applying income tax on withdrawals at the beneficiary’s marginal rate, a simpler, more equitable approach.
Other tax measures introduced, such as raising employer National Insurance, capital gains tax, and limiting IHT relief for farmers, have also faced opposition, though to a lesser extent. The pension IHT plan stands out as the most unpopular of all.
With mounting criticism, pressure is growing on the government to rethink its approach before the policy takes effect in April 2027.
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