What could the draft Finance Bill legislation mean for legacies?
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Last week, Government released draft legislation for the Finance Bill 2025-26, unveiling a few key proposals that could influence the legacy environment.
At Remember A Charity, we’re working with professional advisers and partners to explore the potential impact of these proposals on charitable legacies and preparing a consultation response, but here are three initial takeaways that caught our eye:
1) Unused pension funds coming into IHT from 6th April 2027
After the Chancellor’s Budget Statement in Autumn 2024, it’s no major surprise that most unused pension funds and death benefits will be subject to IHT from 2027, but this is now detailed and written into the draft legislation for the Bill.
This could potentially drive growth in legacy giving, with twice as many estates facing an IHT bill, meaning that more people are likely to be writing and reviewing their Wills and considering the charitable tax incentives when doing so. Then again, faced with higher levels of tax, there’s always the risk that people may feel there is less to go around, which could deter charitable giving. Earlier this year, we considered the potential impact of this change more fully in this blog.
2) Personal Representatives will have responsibility to report IHT
Pensions bring in a new tier of complexity for estate administration, so it’s important to note that personal representatives (rather than pension service administrators) have been given responsibility for reporting and paying IHT. This could make the process more challenging, lengthen estate administration and increase the margin for error for taxable estates.
3) Legacy income must be used for charitable purposes
New proposed charity compliance measures bring legacy income into the definition of ‘attributable income’, affirming that legacy funds must be used for charitable purposes. We’re currently liaising with government for details about the criteria that will be used here, and will share further information down the line.
We’ll be digging into the proposals in more detail in the coming weeks, so please watch this space.