Will one of the tax-raising measures many expect to see at the next Budget surround pensions and IHT?

It may do, if the Government follows the recommendations of The Institute for Fiscal Studies. One of the IFS’ latest suggestions revolves around Inheritance Tax. We often see the issue of IHT popping up at election time – usually with suggestions the Conservatives might scrap it.

In this case, the IFS has floated the idea that the Government should close what it calls IHT ‘loopholes’ connected to pensions and AIM shares. The chancellor has been urged to consider changes that would mean money in defined contribution funds would no longer be exempt.

For savers who pass away before the age of 75, defined contribution pensions can be passed on tax-free (up to a limit of just over £1m). After that age, pension pot withdrawals are taxed under the normal Income Tax rules.

David Sturrock, an economist at the IFS, was reported to have told the Daily Telegraph: “In the coming decade or so, we estimate that the revenues raised by bringing pension pots into the scope of IHT would be in the range of £1bn to £2bn.

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