Labour refuses to extend inheritance tax deadline for grieving families with decision slammed as 'inhumane'

Joe Sledge
Sun, 05 Apr 2026 05:00:01 +0000

The Treasury has rejected calls to extend the inheritance tax payment deadline for families dealing with unused pension funds.

Despite a January recommendation from the House of Lords Economic Affairs Committee to increase the timeframe from six to 12 months, ministers have confirmed no changes will be made.

Exchequer Secretary to the Treasury Dan Tomlinson told peers the Government would maintain the current system.

"The Government does not intend to change the existing, longstanding deadlines which ensure tax is collected quickly and efficiently."

TRENDING

Stories

Videos

Your Say

He added: "IHT is due at the end of the sixth month after the date of death."

Those who fail to meet the deadline face late payment interest of 7.75 per cent.

Pensions commentator Sir Steve Webb said: "It's inhumane . . . No consideration has been given to the human dimension of this. Often bereaved people have a lot to cope with."

"What difference would six months make to the Government, compared with the difference it would make to families?"

Mr Webb said families rely on pension schemes to provide key information, including valuations and beneficiary details, which can delay the process.

He added: "So for a lot of people, this process can take a while, at a time when you're dealing with loss, grief, funeral arrangements."

Roger Liddle raised concerns about how the policy would operate in practice despite supporting its broader aims.

LATEST DEVELOPMENTS

Rachel Reeves 'very happy' to see North Sea oil and gas drilling

HMRC warning as pensioners face tax hit over £700 next year

Scottish Greens pledge to strip King of 'ridiculous' tax perks

Lord Liddle said there could be complications where deaths are unexpected, multiple pension schemes must be traced, or where different personal representatives are involved.

The committee's January report warned the current deadline could expose personal representatives to financial risk.

It said the policy "could mean that personal representatives become liable for inheritance tax on assets they cannot access or control, creating cash flow pressures."

Head of Public Policy at AJ Bell, Rachel Vahey, said: "It is easy to see how many, many estates and beneficiaries are going to face late interest payments at an excruciatingly high rate of four per cent above base rate level."

Chancellor Rachel Reeves announced changes to inheritance tax treatment of pensions in her first Budget in autumn 2024.

From April 2027, unused pension funds will be included in estates for inheritance tax purposes.

Official estimates suggest an additional 1.5 per cent of estates will become liable for inheritance tax in 2027-28, adding to the four per cent already above the £325,000 nil-rate band.

The threshold can rise to £500,000 when a main residence is passed to direct descendants.

Inheritance tax is charged at 40 per cent on amounts above the threshold, although transfers between spouses and civil partners remain exempt.