I am 67 and have two buy-to-lets. I use the rental income along with my state pension to fund my retirement.

The properties are worth about £600,000 in total, and after costs including small interest-only mortgages, I get a rental income of roughly £22,000 per year.

I get a full state pension, so my income each year is about £33,000, which along with my wife's state pension covers all our needs – other than the odd big expense.

This means that I am not drawing much from my £500,000 pension pot, which I built up through work and then transferred to a Sipp at retirement.

My own home is worth about £700,000, so after the Budget announcement that pensions would be drawn into inheritance tax, I now have a much bigger inheritance tax liability – something I hadn't previously worried much about.

The problem is that I can't start taking much out of my pension without the withdrawals going into the higher-rate tax bracket. 

Should I sell my buy-to-lets to cash in the profits, forgo the income from rent and start drawing on my pension for my everyday spending instead?

Ed Magnus of This is Money replies: It sounds like you are in a strong financial position, but of course, that raises the stakes over the tax implications.

Unspent pension pots are now set to be added into inheritance tax calculations in future.

In Labour's first budget, Rachel Reeves announced that pensions will be included in the assets that count towards 40 per cent inheritance tax from April 2027, throwing some families' legacy plans into turmoil.

The buy-to-lets sound like they provide a reasonable income after costs, so you'll ideally want any substitute investment to provide a similar income were you to sell.

There are some savings accounts paying over 4.5 per cent at present - both fixed rates and easy-access.

Stash £600,000 in savings accounts paying 4.5 per cent and you could enjoy a £30,000 annual income - though the interest would be taxed.

If you would prefer to invest the money in your Sipp, there are plenty of funds and investment trusts that offer scope for both capital growth and income.

There are some great ideas in This is Money's 50 of the best funds and investment trusts.

For example, Temple Bar Investment Trust, which invests in a concentrated portfolio of around 30 dividend-generating, large and mid cap companies. 

It comes with dividend income too and the trust yields about 3.5 per cent. 

City of London Investment Trust with its 4.86 per cent yield is a popular option for income-seeking investors, and a so-called dividend hero, having increased dividends for 57 consecutive years.

However, it's worth remembering it is unlikely you'll have £600,000 from the proceeds of your sale - even if they fetch what you say they are worth.

Assuming you own the buy-to-lets in your own name, you will be liable for capital gains tax if they have increased in value since you purchased them.  

This is charged at 18 per cent for basic rate taxpayers and 24 per cent for higher and additional rate taxpayers. 

And before you pay capital gains tax, you need to factor in estate agent fees and solicitors costs.

However, the inheritance tax liability could well be bigger if you decide to hold onto the properties until death.

Inheritance tax is charged at 40 per cent above the tax-free allowances everyone has on their estate, known as nil-rate bands.

This is made up of the standard nil rate band of £325,000 per individual, of which any unused element can be passed on to a spouse or civil partner, effectively doubling their allowance to £650,000.

Under current rules, if you also pass on a main family home to direct descendants, a total of £500,000 each, or £1million combined, is the maximum value that a married couple or civil partners' estate can reach before it starts being liable for the 40 per cent inheritance tax rate.

This means property-owning spouses can benefit from a £1million buffer before their estate incurs inheritance tax.

That said, if the total value of an estate is £2million or more, the additional main residence nil rate band will be tapered at £1 for every £2 over the £2million threshold, meaning some higher value estates eventually lose the own home benefit altogether.

For expert advice, we spoke to John McCaffery, tax partner and head of tax at Alexander & Co, Laura Suter, director of personal finance at AJ Bell, David Hollingworth associate director at broker L&C Mortgages and Neela Chauhan, partner at UHY Hacker Young.

What's your tax advice following the Budget?

Neela Chauhan replies: With the Budget limiting inheritance tax planning opportunities, many retirees are now gifting money to their families earlier than before. 

It is important not to gift away too much money too early and potentially leave yourself without any extra savings for a 'rainy day.'

As you know pensions will also be subject to IHT from 2027, which may encourage people to dip into their pensions earlier than they had before. 

Previously the IHT advantages of pensions meant that many people left their pensions intact for as long as possible.

While pension pots allow individuals to withdraw up to 25 per cent of the amount tax free, dipping into a personal pension early means there is less set aside for any new expenses that might arise in the future like care home fees. 

Laura Suter replies: Currently, pensions are not subject to inheritance tax (IHT), which is important to bear in mind. 

While the Government has announced plans to include unspent pension pots in the IHT framework from April 2027, we don't know how this will work yet. 

It's important not to rush any decisions when it comes to your retirement savings before this deadline, and to bear in mind that currently you can still pass your pension to your beneficiaries without incurring IHT until April 2027.

Once we know what the rules looks like after 2027, you can carefully weigh up your options and may want to get advice from a regulated financial adviser who can assess your options based on your individual circumstances. 

In the interim it's also worth bearing in mind that even if pensions were subject to IHT, there is likely to be a spousal exemption – meaning that you can pass on your pension pot to your spouse without it being counted for IHT purposes. 

That means IHT would only become a factor on the second death within a couple.

Should they sell the rental properties? 

Laura Suter replies: You say your rentals are making you around £22,000 a year, which based on your valuation of the properties means a 3.6 per cent return a year. 

You might want to consider whether you could get a greater return by investing the money - or even putting it in cash savings at current rates - and for less hassle than managing rental properties. 

You might be holding them to benefit from long-term growth in house prices, too, but it's something to consider. 

If you sell them you'd need a plan for the money. You can filter it into an Isa account so it can grow tax free – but with a £20,000 annual limit per person this would take some time between you and your wife.

It also might be worthwhile looking at whether you should transfer some, or all of them into your wife's name, as she has a lower income and isn't currently at risk of becoming a higher-rate taxpayer. 

This may free up the ability for you to take an income from your pension without hitting the higher rate threshold. 

If you have already made a capital gain on the property you can transfer it to your spouse without this being realised.  Effectively, the capital gain moves with the properties.

John McCaffery replies: Selling the properties may not be a terrible idea. Capital gains tax on any gain made would be payable within 60 days of the sale at rates of 18 per cent or 24 per cent. 

The 18 per cent rate is on any gain that falls within your basic rate income tax band when added to his other income in the year. 

You could also transfer a half interest in the properties to his wife prior to sale to make use of her surplus basic rate band. 

Once you have the cash, you could speak with a financial advisor and invest the funds in a business relief arrangement. So long as this was less than £1million each then this would be free from inheritance tax after two years. 

There is often a payoff between capital gains tax and inheritance tax. It is generally better, if you can afford it, to pay a 24 per cent tax on a gain, rather than a 40 per cent tax on the entire value if saving inheritance tax matters to you.

David Hollingworth replies: The buy-to-let properties have clearly worked well in providing a good regular income that has so far allowed you to leave your pension savings untouched.

It sounds like the mortgages are relatively small, but you should still consider any associated early repayment charges that may be incurred along with the other costs of selling the property. 

Aside from the personal capital gains tax allowance, if you ever lived in either of the properties as your main residence but then kept it to rent it could reduce the bill, and you won't need to pay capital gains tax for the time it was your main residence plus the last nine months. 

You would then be able to consider the potential lump sum you will be left with and what you'd like to do with it, which would allow your tax adviser to consider it as part of your IHT planning. 

That can then be considered alongside the position if you were to keep the properties to continue to benefit from the income. 

The relief available on mortgage interest for buy-to-let is now only at basic rate, so if your income increases to take you into the higher rate banding, it will have a bearing on your tax bill for the income you make from the properties although that impact will depend on the size of the mortgages.

You may also want to factor in whether the properties cause you any work to maintain and manage, if that isn't all covered by a management agent. 

If there is any 'hassle factor' then that may be something to feed into your thoughts and how they sit with your retirement plans or whether it could become a bigger burden over time.

What could help them save on inheritance tax?

John McCaffery replies: If the income is surplus to your requirements, then there is an inheritance tax relief known as 'gifts out of income.' 

These are regular, habitual gifts you could make to family members. For example, to help with holidays, bills or nursery fees. 

If they are out of surplus income - this must be surplus to their own income requirements - it will immediately fall outside of your estate for inheritance tax purposes, rather than having to wait seven years. Any such gifts should be documented.

It is also not clear whether you have drawn out your 25 per cent tax free lump sum from your pension. 

If not, you could do this and also consider investing these funds in a business relief arrangement, with the same benefits as detailed previously.

You could also look to gift some of the cash. This would fall outside of your taxable estates completely after seven years, and the amount subject to inheritance tax starts to taper off after three.

In addition to the above, both you and your wife have a £325,000 nil rate band and a £175,000 residence nil rate band - assuming you leave your home or funds derived from it to a direct descendant. 

These are transferable between spouses if not used on the first death. This means that £1m of the value of the estate should not be subject to inheritance tax. 

Coupled with some of the planning above, you may be able to remove the whole of your estates from inheritance tax if you chose to do so.

Laura Suter adds: If you're worried about your estate being subject to inheritance tax you might want to look at gifting some of your money now. 

There are gifting allowances available to both you and your wife each year, without factoring in the seven-year rule. 

But it's crucial that you know you won't need that money in the future – either for ill health, care or other costs. 

At 67, you may have another 30 years in retirement, or more, so it's important not to deprive yourself now just because you're worried about tax in the future.