From April 2027, inherited pensions will be included when calculating inheritance tax (IHT) bills. Previously, pensions did not form part of an estate for IHT purposes, allowing many families to pass them on tax? free. This change means people with large retirement savings must rethink estate planning to avoid higher tax exposure.
One option increasingly being considered is the Enterprise Investment Scheme (EIS). This is a government-backed scheme supporting small companies by offering tax incentives to investors who buy new shares. Companies must have fewer than 250 employees and gross assets under £30m at the time shares are issued, to be eligible.
Investors receive 30% income tax relief on any money they put into an EIS. There is no Capital Gains Tax on profits made from an EIS. Most importantly, EIS shares can qualify for IHT relief. They must be held in companies that meet business relief requirements (relief for IHT purposes is capped at £2.5m) and must be held for at least two years at the time of death. Anything above the £2.5m threshold is taxed at 20% rather than 40%.
Please get in touch with us if you would like to find out more about the EIS.
