James Wild

On behalf of His Majesty’s Opposition, I wish to speak to new clauses 22 to 24, tabled in my name and those of my hon. Friends. As the Minister set out, clauses 63 to 68 introduce measures to apply inheritance tax to unspent pension assets and other death benefits for deaths occurring after 6 April 2027. This Labour Government have taken taxes to record levels, with £26 billion in additional taxes in this Budget and £66 billion since the election. These tax increases were not mentioned in Labour’s manifesto. Labour is increasing taxes on family businesses, farms, jobs, dividends, savings, motorists and now death. Removing the inheritance tax exemption for pensions could undermine efforts to encourage people to save at a time when people are not saving enough. And what do the Government do? They limit the salary sacrifice pension contributions scheme and introduce a new raid on people’s pensions pots. The Minister did not refer to the impact assessment, but it is worth pointing out that it estimates that 10,500 estates will now become liable for inheritance tax, raising £1.5 billion by 2029, and 38,500 estates will pay more inheritance tax than was previously the case. That is why we oppose this extension of inheritance tax and the underlying principle, to which the Minister seemed to allude, that people’s money belongs not to them but to the state. New clause 22 is straightforward. It would require the Chancellor to set out the impact of these measures on pension saving, household saving decisions and personal representatives. There is real concern—I am surprised the Minister did not address this—about the administrative burden being placed on personal representatives and the effect on the industry. Personal representatives will be required to identify every pension asset, calculate the inheritance tax due and ensure payment within six months, and they will be personally liable if they fail to settle all the liabilities due. In many cases, that deadline would be impossible to meet and must be extended. Furthermore, if a pension fund has to quickly sell illiquid assets, such as commercial property, it may not get the full market value, but the Bill does not introduce a relief where the underlying assets must be sold and the proceeds are less than the value of the assets at the time of death. Late payments will attract interest at 8%. By contrast, someone in self-assessment has 10 months to pay tax on the income they already understand. Both the Association of Taxation Technicians and the Chartered Institute of Taxation have offered some practical solutions, the first of which is to extend the withholding periods. Personal representatives can ask pension administrators to withhold 50% of funds for up to 15 months, but that is simply not long enough for the complex cases I have referred to, particularly where business property valuations have to be agreed with HMRC. Will the Minister consider allowing HMRC to extend withholding in such complex cases? Secondly, the Government should allow instalment payments for illiquid pension assets. Billions of pounds of pensions wealth are in illiquid assets. The Government allow inheritance tax to be paid over 10 years for illiquid estate assets. Why deny the same practical relief for pensions? When this policy was announced, the Office for Budget Responsibility gave it a “very high” uncertainty rating and estimated that behavioural effects will cut the static yield by about 43%; the Government’s own forecasters accept that the changes may well significantly alter saving behaviour. The new clause would simply require the Chancellor to assess that impact and come to the House to make it clear. New clause 23 would require the Chancellor to consult on the impact of clauses 63 to 67, and whether they deliver better outcomes for savers and pensioners. The truth is that the Government rushed the consultation out after the 2024 Budget and followed it with a very narrow technical consultation, which did not consider the principled question of whether this approach to pensions being brought within the inheritance tax framework was appropriate. As the Investing and Saving Alliance told the House of Lords Economic Affairs Committee in its inquiry to which the Exchequer Secretary also gave evidence: “If we were consulted and listened to, we probably would not be having this discussion today, because I do not think pensions would be going into IHT.” Both the chartered institute and the ATT have criticised the Government for consulting on pensions in isolation, rather than in the context of individuals’ wider inheritance tax position. Our new clause is explicit. Consultation must take place to assess whether these changes “deliver better outcomes for savers and pensioners” —wording that reflects the commitment the Labour party made in its manifesto. New clause 24 is essential. It would require HMRC to publish comprehensive guidance on the new rules for pensions and to set up a dedicated helpline. Why does that matter? Because this measure will be incredibly complex in practice. The chartered institute has said that professional executors are already questioning whether they can continue to operate in the market at all. Some firms, we are told, are already leaving the market. If professionals step back, the burden falls on lay personal representatives: often grieving family members or friends, with more errors, delay and potentially a wider tax gap ensuing. Professional indemnity insurers also need clarity, yet when is HMRC due to deliver detailed guidance? Not until spring 2027, just weeks before the changes take effect. That is completely outrageous and far too late. That is why the new clause requires guidance to be published within six months of the Bill being passed. I want to touch on a broader concern that has been raised with me on the potential serious unintended consequences for unmarried couples. Today, couples can anticipate making financial provision for each other via pensions, but if this measure comes into force they will have to look at other options. If one member of an unmarried couple in their 50s or 60s dies with a pension at peak value, the survivor could lose up to 40% of that fund. Are Ministers talking to pension scheme administrators to mitigate the risks for such couples and to provide clear guidance? These clauses increase taxes, add complexity, penalise saving and add stress for grieving families. Despite clause 67, we are also advised that there is still a risk of double taxation of inheritance tax and income tax, which could see beneficiaries paying an effective tax rate of 67%. Our amendments seek to mitigate their worst impacts. The Chancellor should assess the real impact on saving behaviour and personal representatives. She should consult properly on these provisions and she must provide clear guidance, backed by dedicated support. We should be incentivising saving and encouraging people to do the right thing. Extending inheritance tax does the opposite, and we will oppose the Government’s measures.