Concern over axing of tax break for inherited pensions Experts are continuing to voice concerns over plans being drawn up by the Treasury and HMRC to axe a valuable income tax break for families inheriting pension savings. All untouched pensions can be passed on free of inheritance tax, but if the person dies after the age of 75, their beneficiaries must pay income tax on withdrawals. But if the person dies before 75 the pension is exempt from both inheritance tax and income tax. The Government said on Tuesday that it would consider charging all beneficiaries income tax on inherited pensions, regardless of the age of the deceased. Tom Selby from AJ Bell said: “The rules are still to be finalised in legislation and at this stage it is not 100% clear exactly how pension assets will be treated on death. This needs to be clarified urgently so that pension savers can make informed decisions based on the planned rules, albeit those rules could yet be re-written if a future government changes pension legislation again.”