Tax & estate planning guide
Inheritance Tax and pensions from April 2027
From 6 April 2027, most unused pension funds and pension death benefits will be brought into the value of a deceased person's estate for Inheritance Tax purposes. This is a major change to how pensions interact with estate planning.
The change
Most unused pension wealth will become part of the IHT estate.
HMRC states that from 6 April 2027, most unused pension funds and pension death benefits will be included in the value of a deceased person's estate for Inheritance Tax purposes.
This removes much of the historic difference between pension wealth and other assets for IHT purposes.
The current treatment continues to apply to deaths before that date, subject to the existing rules.
What is in scope?
The reforms cover most unused pension funds and death benefits.
The legislation applies broadly to unused pension funds and pension death benefits from registered pension schemes, including most defined contribution benefits and relevant defined benefit death benefits.
HMRC's technical notes explain that the reforms are intended to apply consistently across most pension arrangements rather than relying on whether scheme trustees or administrators have discretion over who receives the benefit.
From that date, most unused pension wealth will need to be considered alongside the rest of the estate when assessing IHT.
Important exclusions
Not every pension-related payment will be brought into scope.
Death-in-service benefits
All death-in-service benefits payable from a registered pension scheme are excluded from the value of the estate for IHT from 6 April 2027.
Dependant's scheme pensions
Certain dependant's scheme pensions from defined benefit or collective money purchase arrangements are excluded.
Continuing annuities
Continuing annuity payments can fall outside the new notional pension property rules.
Small amounts
HMRC's process includes specific treatment for certain very small pension amounts, including funds below £1,000 in the withholding process.
Administration
Personal representatives will be responsible for reporting and paying IHT.
The final process differs from the original consultation proposal. From 6 April 2027, the deceased's personal representatives will be responsible for reporting and paying IHT due on unused pension funds and pension death benefits.
Pension scheme administrators will provide information needed for the estate calculation and will have processes for withholding and direct payment where appropriate.
The main tax change is already legislated, but some process details are being supported by secondary legislation, technical notes and guidance.
IHT and Income Tax
A pension benefit can potentially be affected by more than one tax regime.
The new IHT treatment does not replace the existing Income Tax rules that can apply to pension death benefits.
Depending on the member's age at death, the form of benefit and the beneficiary's circumstances, Income Tax may still apply when pension benefits are later drawn, even where IHT has already been considered at estate level.
The actual outcome depends on the pension arrangement, age at death, beneficiary and way benefits are accessed. Detailed advice may be needed.
Planning implications
Pensions will need to be considered as part of the wider estate, not in isolation.
Historically, some retirement plans deliberately preserved pension assets for beneficiaries while spending other assets first. From April 2027, that strategy may produce a different IHT outcome.
Drawdown strategy
The order in which pension, ISA and other assets are used in retirement may need reviewing.
Beneficiary nominations
Death-benefit nominations still matter for who receives benefits, even though IHT treatment is changing.
Life insurance
Life cover written appropriately may help provide liquidity for an estate that faces a larger IHT bill.
Gifting & estate planning
Lifetime gifts, trusts and other planning should be considered alongside pension strategy rather than as separate exercises.
Income Tax, investment growth, retirement income security, gifting rules and longevity all matter.
Estate & retirement planning
Will the April 2027 pension changes affect your estate plan?
We can help review pensions, other investments, withdrawals and estate-planning objectives together, while identifying where specialist tax or legal advice is required.
Book a conversationThis guide is for general information only and is not personal pension, tax, legal or financial advice. The reforms apply to deaths on or after 6 April 2027. Finance Act 2026 has legislated the change, while HMRC continues to publish secondary legislation, technical guidance and operational detail ahead of implementation. Tax treatment depends on individual circumstances and can change. Content checked against HMRC technical notes and policy papers current at 16 September 2026.