Inheritance tax on pensions from April 2027: what families need to know
Most unused pension funds will count towards your estate for inheritance tax from 6 April 2027. Here's how it will work.
From 6 April 2027, most unused pension funds and pension death benefits will be included in a person's estate for inheritance tax. The change is now law under the Finance Act 2026.
What's changing
At the moment, money left in a pension when someone dies is usually outside their estate for inheritance tax. From April 2027, most of it will be added to the estate and could be taxed at 40% where the estate is above the available nil-rate bands.
What isn't included
- Death in service benefits paid by registered pension schemes stay outside inheritance tax
- Anything left to a spouse or civil partner is still normally exempt
Who deals with the tax
The personal representatives (executors) will be responsible for reporting and paying any inheritance tax on the pension. They must tell the pension scheme about the death, and the scheme must give them the value of the pension within 4 weeks.
Why it matters
The government expects around 10,500 more estates a year to pay inheritance tax as a result. Pensions can also still face income tax when beneficiaries draw them, if the person died aged 75 or over.
What to do now
- Review your expression of wishes with your pension provider
- Update your will and think about who will act as executor
- Consider whether to draw on pensions differently during your lifetime
Inheritance tax planning depends on your whole family's position — talk to us before making changes.