Lords warn pensions inheritance tax changes risk overwhelming personal representatives

"Peers have warned that the government's proposed inheritance tax reforms covering pensions could place an unrealistic and potentially unmanageable burden on personal representatives, creating widespread delays, cashflow pressures and legal risk for those administering estates. In a report published today, the House of Lords Economic Affairs Finance Bill Sub-Committee examined the tax administration and practical implications of measures in the government's Draft Finance Bill 2025-26."

"One of the committee's strongest criticisms relates to the decision to bring unused pension funds within the scope of IHT while retaining the existing six-month deadline for payment. Peers concluded that it is "not realistic" to expect personal representatives to meet that deadline, given how long pension scheme administrators typically take to provide valuations and release information."

"Peers also raised concerns that personal representatives could become liable for IHT on pension assets they neither control nor can access, creating significant cashflow strain. The report cautions that this could deter both lay individuals and professionals from acting as personal representatives, increasing costs and delays for bereaved families. To address these risks, the committee has called on the government to introduce a statutory "safe harbour" protecting personal representatives from late payment interest where they can demonstrate that reasonable steps were"

Bringing unused pension funds and death benefits within inheritance tax while retaining a six-month payment deadline will often be impossible because pension scheme administrators typically take longer to provide valuations and release information. Personal representatives may therefore incur late payment interest through no fault of their own and face liability for assets they cannot access or control, creating significant cashflow strain. These pressures could deter lay individuals and professionals from acting as personal representatives, increasing costs and delays for bereaved families. Introducing a statutory 'safe harbour' to protect personal representatives from late payment interest when reasonable steps were taken is proposed to mitigate these risks.

Read at Business Matters