Changes to inheritance tax (IHT) mean pension wealth could soon form part of your estate in circumstances. Many people previously expected it to remain outside the IHT calculation.
From 6 April 2027, most unused pension funds and pension death benefits will be included in the value of a deceased person’s estate. This is for IHT purposes, subject to any available exemptions and excluded benefits.
HMRC has confirmed that from 6 April 2027, most unused pension funds and pension death benefits will be brought within the value of a deceased person’s estate for inheritance tax purposes.
What this means for you
This change could affect existing estate planning arrangements.
Finance Act 2026 received Royal Assent on 18 March 2026, and the new rules will apply where the pension scheme member dies on or after 6 April 2027. If death occurs before that date, the current rules will continue to apply. Even if benefits are paid later.
Planning ahead
With these changes on the horizon, now is a good opportunity to review your wider estate planning arrangements.
That could include reviewing your will, checking pension expression-of-wish forms, considering estate liquidity and understanding who will administer your estate.
HMRC has also confirmed that personal representatives will generally be responsible for reporting and paying any inheritance tax due on “notional pension property”, although beneficiaries may become jointly and severally liable in certain circumstances once benefits vest in them. Further HMRC guidance, support tools and secondary legislation are expected before April 2027.