Notional pension meaning

On 26 November 2025, Rachel Reeves, the Chancellor of the Exchequer, presented the Labour administration’s second Budget, widely referred to simply as Budget 2025. On the same day, the Office for Budget Responsibility (OBR) set out its economic and fiscal outlook for the UK. Proceedings opened poorly, and chaotically, with an OBR forecast leaking amidst a slew of prior government-led briefings and the release of a frustratingly static index of ‘Budget 2025 tax related documents’ to which hyperlinks were not inserted until close to 8pm, together with a piecemeal, stop‑start publication of tax information across scattered web pages, sending readers on a fruitless treasure hunt for clarity or coherence and with no appearance whatsoever of the Overview of Tax Legislation and Rates (OOTLAR). Headline measures comprised, among other items, extending, for another three years to April 2031, the existing personal allowance and income tax bands for taxpayers, and increasing income tax rates applied to property, savings and dividend receipts, as well as imposing employer and employee National Insurance contributions (NICs)...

STOP PRESS On 11 May 2026, HMRC issued a new technical note, inheritance tax on pensions. It explains the inheritance tax (IHT) changes made by the Finance Act 2026 for deaths on or after 6 April 2027. The note outlines how notional pension property will be pinpointed, assessed and apportioned to beneficiaries, who must report and settle any IHT due, how withholding notices and the pensions direct payment scheme will work, and how the reforms dovetail with existing income tax rules on pension death benefits. The government is expected to bring forward supporting secondary legislation on information-sharing duties later this year. HMRC will provide guidance, supplementary materials and interactive tools for personal representatives by April 2027. This Practice Note is being revised to incorporate the technical note. For more detail, see LNB News 11/05/20026 40. This Practice Note explains how IHT rules apply to the build-up and payment of benefits from HMRC-registered occupational and personal pension schemes. Importantly, reforms are in train to draw unused pension funds and death...

Pay as you earn (PAYE) Pay as you earn (PAYE) is the system through which income tax (together with National Insurance contributions (NICs) and certain other statutory deductions) must be withheld by employers (and other payers) and accounted for to HMRC in respect of specified payments of, namely the following categories: employment income pension income social security income (together, PAYE income). For further information and guidance, see the Practice Note titled Scope of the PAYE system. PAYE income typically covers cash amounts paid to employees or directors (eg salaries, bonuses and termination payments). Non-cash remuneration is generally outside the operation of PAYE, but an important exception applies where amounts are provided as (or treated as) readily convertible assets for PAYE purposes. In the sphere of employment-related securities, whether PAYE obligations arise depends largely—though not entirely—on the securities in point being readily convertible assets. For full details on the meaning of readily convertible assets, see Practice Note: PAYE—readily convertible assets, intermediaries and...

ARCHIVED This Practice Note summarises the state support potentially available to older clients and clarifies how means testing operates for both income and capital. It also considers the rules on deliberate deprivation of income or assets, both for social security benefits and for local authority care charges under the Care Act 2014. Benefits for older people fall into three strands: contributory (dependent on sufficient National Insurance contributions), non‑contributory and non‑means‑tested (based on status such as age or disability), and means‑tested (assessed against the claimant’s income and capital). Relevant Benefits Pension and pension related benefits New State Pension Graduated Retirement Benefit (historic entitlement) Guaranteed Minimum pension—contracted out rights Pension Credit—guarantee credit and saving credit War pensions—where applicable Disability—related benefits Attendance Allowance Personal Independence Payment (for those below State Pension age) Industrial Injuries Disablement Benefit Means-tested benefits Pension Credit Housing Benefit—for claimants over the State Pension age...