The opportunities for tax planning after the death of a spouse

Tax planning

It was refreshing to see that Kara Gammell’s  article for the Telegraph spelt out the opportunities for tax planning and pensions to protect surviving partners. I say this as I still see a constant flow of misinformation about tax planning,  coming from unqualified and uniformed offshore financial services firms that sell QROPS.

The Tax Planning Myths about UK pensions

  • 55% tax payable on death over 75

The 55% tax charge was removed in April 2015

  • 45% tax payable on death over 75

Only for those over 75 and who will die before April 2016. In other words, no one currently  under 74  will have their pension taxed at 45% on death.

  • Save 45% income tax

Covered in a previous blog- Do expats have pensions that pay over 150,000 pounds a year that are taxed in the UK?

  • Save Inheritance Tax by transferring into a QROPS

Registered pensions in the UK do not attract Inheritance Tax. Any firm that promotes tax planning to save Inheritance Tax by moving to a QROPS does not understand Inheritance Tax planning.

The Tax Planning Opportunities

Should someone die before 75, the UK pension fund does not attract any income tax charge and can be paid out- if needed. Leaving many tax planning options to the beneficiaries.

Should someone die after 75, any income or capital from the UK pension  fund would be taxed at the beneficiaries‘ own tax rate. In fact, just in the same way that an individual with their own QROPS would be taxed on income. So, in this case, do QROPS provide any great additional tax planning for wealth protection on death?

Now, any beneficiary can be named to recieve benefits- not binding on trustees. The new rules allow beneficiaries to keep the funds outside of their estate to be passed on to the next generation without Inheritance Tax. In the meantime, the beneficiary ( spouse in this case ) has access to income and capital for the remainder of his/her life.

Even better, such a fund does not count against the surviving spouse’s Lifetime Allowance. So, for those will large pension funds, the addition of a spouse’s fund for pension provision will be great for tax planning, pension planning and wealth protection.


If you have a UK pension, have you provided the trustees with an expression of wish form or a letter ( non-binding ) to the trustees to nominate beneficiaries?  Doing so could just be the ideal way to provide your family with valuable tax planning opportunities.

The original article

The views expressed in this article are not to be construed as personal advice. You should contact a qualified and ideally regulated adviser in order to obtain up to date personal advice with regard to your own personal circumstances. If you do not then you are acting under your own authority and deemed “execution only”. The author does not except any liability for people acting without personalised advice, who base a decision on views expressed in this generic article. Where this article is dated then it is based on legislation as of the date. Legislation changes but articles are rarely updated, although sometimes a new article is written; so, please check for later articles or changes in legislation on official government websites, as this article should not be relied on in isolation.



Chris Lean

Chris is a Chartered Financial Planner who writes blogs and articles to simplify and explain some of the financial issues that affect UK expats. Subjects include; hot topics, regulation and the ever-changing world of finance.

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