Question to the HM Treasury:

To ask His Majesty's Government whether they intend to permit inheritance tax attributable to illiquid assets held within pension schemes to be paid by instalments; and what assessment they have made of the risk of forced asset sales to meet the payment deadline.

Inheritance tax (IHT) is due six months from the end of the month in which the death occurred. Late payment interest will begin to accrue on any outstanding IHT after this point. These deadlines are longstanding requirements which ensure that the tax due is collected quickly and efficiently.

Personal representatives will need to identify the deceased’s pension schemes and, as with identifying other assets, they can do this by examining the deceased’s paperwork and asking friends, family and any solicitor or accountant they had.

Pensions dashboard will help reconnect individuals with lost pots and increase engagement to support retirement planning. However, personal representatives and third parties will not be able to access pensions dashboards to conduct searches on behalf of others in the initial iteration.

The government has laid regulations introducing statutory deadlines for information sharing between personal representatives and pension schemes, to ensure the process of calculating, reporting and paying IHT due on pensions does not take longer than necessary. HMRC will provide guidance and templates for personal representatives and pension schemes to support this process.

Personal representatives and prospective personal representatives can direct pension schemes to withhold 50% of non-exempt pension benefits for up to 15 months to ensure that there are sufficient funds available to pay any IHT due. Personal representatives, prospective personal representatives and beneficiaries can also direct the pension scheme to pay any IHT due on the pension directly to HMRC before releasing the rest of those benefits, subject to certain conditions. These changes were introduced in response to feedback from tax and legal representative groups on measures to aid personal representatives administering estates, and to facilitate timely payment.

Illiquid assets held in pension schemes already need to be liquidated to provide members with an income in retirement or their beneficiaries with death benefits. If liquidating the asset is not desirable, there are several ways to pay the IHT due on the pension component of an estate, including paying the IHT due from non-pension funds.