Millions of State Pension recipients may have paid too much income tax after HMRC admitted it made errors when calculating tax on State Pension income.
The issue affects people paying tax through PAYE, Self Assessment and Simple Assessment, with HMRC now working to correct the mistake.
While any refunds will be welcome, the story is also a useful reminder of something many people overlook: pension rules change more often than most of us realise. If something as fundamental as State Pension tax can affect millions of people, it's worth asking whether your own plans are still up to date.
Your pension is about more than retirement income
For most people, a pension can become one of the largest assets they leave behind.
Although the recent HMRC announcement relates to income tax, there are also wider changes on the horizon that could affect what happens to pension savings after death.
The Government has proposed changes that could bring certain unused pension benefits within the scope of Inheritance Tax from April 2027. While the legislation is still progressing and the final details have yet to be confirmed, many people are already reviewing their estate planning so there are no surprises later.
Read more about How to Reduce Your Inheritance Tax Liability: 6 Steps That Work
Is your Will still doing what you want it to?
It's easy to think that once you've signed your Will, the job is done.
In reality, a Will should be reviewed every few years, particularly if your finances, family circumstances or the law have changed.
You may want to review your Will if:
- your estate has increased in value
- you've built up pension savings
- you've bought or sold property
- you've married, divorced or your family circumstances have changed
- you've welcomed children or grandchildren
- there have been significant changes to tax or inheritance rules
Your Will may still be legally valid, but that doesn't always mean it reflects your current wishes or remains the most tax-efficient way to pass on your estate.
Don't overlook your pension Expression of Wishes
Something many people forget is their pension Expression of Wishes, sometimes called a Nomination of Beneficiary.
This is a separate form held by your pension provider that tells them who you would like to receive your pension benefits after your death.
Even if your Will is up to date, an old Expression of Wishes could mean your pension is distributed differently from what you now intend.
Reviewing both documents together helps ensure your estate planning works as a whole, rather than leaving important decisions to outdated paperwork.
Why keeping your plans up to date matters
Tax rules don't stand still.
The recent HMRC tax error and the proposed Inheritance Tax changes are separate issues, but they both highlight how quickly pension and tax rules can evolve.
Many people put their Will in a drawer after signing it and understandably don't think about it again for years. However, as your financial circumstances change and legislation develops, it's sensible to check that your plans still reflect your wishes and continue to work in the way you intended.
Need Help Reviewing Your Will or Estate Plan?
At Burtons Solicitors, we help individuals and families with their Wills, estate planning arrangements, Trusts and Lasting Powers of Attorney to make sure they continue to reflect both their wishes and current legislation.
Simply complete our quick enquiry form and one of our solicitors will be in touch.
Alternatively, call us on 01892 824577 or email info@burtons-solicitors.com to discuss your circumstances.
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