The following Trusts and Inheritance Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:
To encourage people to make provision for retirement, pension schemes benefit from specific tax reliefs. The predominant reliefs relate to income tax, but there are also targeted inheritance tax provisions which form part of the pensions landscape. This guidance note describes the inheritance tax rules and reliefs which affect pension schemes at each stage of the pension lifecycle.
The current income tax regime for pensions follows an ‘Exempt-Exempt-Taxed’ structure:
contributions to registered pension schemes are exempt from income tax
income and gains arising on the investments within the pension scheme are exempt from income tax and capital gains tax
withdrawals from the pension scheme are taxed as income
Each stage in this lifecycle could potentially have inheritance tax consequences. Contributions may involve a transfer of value. Pension investments are held within a trust or comparable vehicle. The residual fund on death could be regarded as part of the deceased’s estate available for distribution to his beneficiaries. Specific rules are required to bestow inheritance exemption to match or complement the income tax position. Note, however, that in certain circumstances pension contributions and investments are chargeable to inheritance tax.
For more information about the income tax rules during the member’s lifetime, see the Pension Planning sub-topic in the Personal Tax module, and in particular the following guidance notes:
Tax relief for pension contributions
Pension benefits from a defined contribution pension scheme (from 6 April 2015)
Pension benefits from a defined benefit pension scheme
Income tax rules relating to death benefits are dealt with in this module in the Income tax treatment of pensions on death guidance note.
The reliefs described below, which appear in IHTA 1984, ss 12, 58, 151 apply to:
registered pension schemes
qualifying non-UK pension schemes (QNUPS) as defined by IHTA 1984, s 271A
‘section 615(3) schemes: [These are occupational schemes for non-UK residents working abroad as defined by ICTA 1988, s 615]’
Employer financed retirement benefit schemes (EFRBS)
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