Pensions taxation in (and not in) the Budget

With a Labour manifesto that ruled out most substantial revenue raisers the taxation of pensions attracted close interest in the weeks preceding Rachel Reeves’ first Budget. Despite the gallonage of ink spilled in speculation however rumoured changes to the income tax and National Insurance contributions (NICs) treatment of pensions failed to materialise. And while the Budget did contain reforms to the inheritance tax treatment of pensions Labour’s first Budget felt more notable for changes that didn’t materialise than the ones that did.

Inheritance tax

Let’s start with the one change that was in the Budget. From 6 April 2027 defined contribution (DC) pension pots will be brought into people’s taxable estates for the purposes of inheritance tax. The question of how pensions are treated by the inheritance tax system has become one of increasing importance ever since April 2015 when then George Osborne did away with...