Pensions and inheritance tax from April 2027
6 April 2027 · Enacted; future commencement
For deaths on or after 6 April 2027, most unused pension funds and pension death benefits enter the inheritance tax calculation. Exemptions, exclusions and estate allowances still matter.
What changes and when?
Finance Act 2026 received Royal Assent on 18 March 2026. It legislated the inclusion of most unused pension funds and pension death benefits in the value of an estate for inheritance tax purposes, for deaths on or after 6 April 2027. The relevant trigger is the date of death, rather than the date a beneficiary later receives payment.
The measure changes the inheritance tax treatment of pension wealth left at death. It does not impose an annual inheritance tax charge on pension balances held by living savers.
Does every pension face a 40% charge?
No. Inclusion in the estate calculation is different from a tax bill. For 2026/27, the standard inheritance tax nil-rate band is £325,000. Additional allowances may be available for a qualifying home and unused allowances can sometimes transfer between spouses or civil partners. The standard 40% rate applies to the taxable amount above available allowances.
HMRC identifies excluded benefits, including qualifying death-in-service benefits and dependants' scheme pensions. Transfers to exempt beneficiaries, such as a qualifying spouse or civil partner, can remain exempt. Cross-border cases can have additional residence-related conditions, so these broad descriptions cannot settle every estate's position.
Who deals with the tax?
Personal representatives will report the pension property and be liable for the inheritance tax due. Pension beneficiaries can become jointly liable for the tax attributable to their benefits. HMRC has also set out a mechanism allowing registered schemes to pay attributable inheritance tax directly to HMRC following a valid notice.
HMRC's August 2026 technical note adds detail about information sharing, withholding and payment processes. It explicitly describes itself as a technical note rather than final guidance. Keep pension records and beneficiary details accessible, and check the official implementation guidance as it develops. The effect on a particular estate depends on its full circumstances.
Sources
General information, not a personal recommendation. Tax treatment and pension rights depend on the rules and individual circumstances.