Introduction
Pensions and inheritance tax from April 2027 need to be considered together when reviewing an estate plan. Under changes legislated in Finance Act 2026, most unused pension funds and pension death benefits will be included in the value of a deceased person's estate for inheritance-tax purposes for deaths on or after 6 April 2027.
That does not mean every pension or every beneficiary will face the same bill. Excluded benefits, exemptions, allowances, scheme rules and individual circumstances matter. This guide explains the direction of the change using HMRC's technical notes, with a check against its October 2026 pensions newsletter. It is not a pension-transfer, withdrawal or investment recommendation.
What changes on 6 April 2027?
HMRC's technical note explains that Finance Act 2026 received Royal Assent on 18 March 2026. The legislation brings most unused pension funds and pension death benefits within inheritance tax for deaths on or after 6 April 2027. Describing this simply as an unlegislated consultation proposal would therefore be out of date.
The date of death matters. HMRC states that where the member dies before 6 April 2027, the current rules apply even if benefits are paid afterwards. A payment arriving after the date does not by itself move an earlier death into the new regime.
Detailed implementation guidance and supporting processes continue to develop. Check the latest official material before relying on a process description or making a decision. The distinction between enacted primary legislation, regulations and guidance is important when reading older articles.
Why the word 'most' matters
Pensions are not all the same kind of asset or benefit. A defined contribution arrangement, a defined benefit scheme, an annuity and employment-linked death benefits may operate differently. Your statement's headline value may not describe the amount that is relevant under the inheritance-tax rules.
HMRC identifies excluded benefits, including qualifying dependants' scheme pensions and death-in-service benefits that meet the statutory conditions. Other specified exclusions also exist. A benefit should not be treated as excluded simply because a provider or family uses a familiar label.
Ask each scheme to explain the benefits that might be paid on death and how they fall within the applicable rules. Do not assume that a partner's continuing pension is treated identically to an unused investment pot or that every lump sum from an employer meets the same conditions.
Look at the whole estate rather than one account
Many families previously treated certain discretionary pension death benefits as separate from the assets considered for inheritance tax. Bringing relevant benefits into the calculation can change how allowances and exemptions apply across an estate, even where the will itself has not changed.
The standard nil-rate band and any available residence nil-rate band remain part of the wider review. Larger estate values may also affect the residence-band taper. Do not assume that owning a home and having children guarantees the largest headline allowance after pension values are considered.
This does not justify guessing a bill from the pension balance alone. A calculation needs the relevant estate value, available bands, gifts, liabilities, exemptions and benefit details. The related inheritance-tax thresholds guide explains the starting concepts without promising a particular outcome.
Who receives the benefit still matters
Inheritance-tax exemptions can apply to certain beneficiaries, including qualifying transfers between spouses and civil partners. Residence and cross-border conditions need particular checking. A pension becoming relevant to inheritance tax does not mean a spouse exemption has simply disappeared.
Unmarried partners do not receive the same spouse or civil-partner exemption merely because they have lived together for years. Children and other beneficiaries also have different circumstances. A plan should consider who may receive each benefit rather than assuming that all nominations produce the same tax result.
Review expressions of wishes and beneficiary nominations with the scheme. In many discretionary arrangements they guide the decision-maker rather than overriding the scheme rules. Your will is not a substitute for updating a pension provider's records, and a nomination is not a guarantee that inheritance tax cannot apply.
Executors and administrators will need more information
HMRC describes personal representatives as responsible for reporting and paying inheritance tax under the new framework, with specific processes involving pension scheme administrators and beneficiaries. An executor should not assume that the provider will independently settle every part of the estate's tax position.
Technical note 2 explains information-sharing stages, including notification, valuation information and processes for withholding or paying relevant tax from benefits. The exact powers and evidence requirements can depend on whether someone is an acting personal representative or a prospective one.
This guide deliberately does not turn those technical processes into a universal checklist with promised deadlines. Representatives should use the latest HMRC guidance and obtain advice on the particular estate. Keeping a reliable list of pension providers is a practical step that can help them find relevant information.
Inheritance tax and income tax are separate questions
Pension death benefits can also raise income-tax issues. The outcome may depend on the member's age, the benefit type, how it is paid and the applicable legislation. A statement that a payment is free of one tax does not prove that it is free of every tax.
HMRC's October 2026 newsletter also describes further Budget measures affecting pension death benefits and the interaction of income tax with inheritance tax. Some measures are intended for Finance Bill 2026–27 and have different effective dates. Older articles about payment timing may therefore need checking.
Avoid combining tax rates from a headline and assuming the resulting percentage applies to your family. Interaction rules, exemptions and the order of calculations matter. Ask an appropriately qualified adviser to explain the calculation and current legislative position rather than relying on a dramatic worst-case figure.
Do not rush to withdraw or give away a pension
Taking money out can create income tax, change your investment position and reduce resources intended for retirement. Moving it into a bank account does not automatically remove it from your estate. A withdrawal made only because of an inheritance-tax headline may solve nothing and create another problem.
Giving money away can also reduce financial independence and introduce gift, ownership and recipient risks. Pension transfers may involve loss of valuable features or protections. These decisions require suitable advice, not a standard instruction that everyone should spend or transfer pensions before April 2027.
Consider your own income needs, health, dependants and ability to cope with unexpected costs first. Estate planning is only one part of retirement planning. Where regulated financial advice is needed, use an appropriately authorised adviser and check the scope of their advice.
Practical information to gather for a review
List each pension provider and the type of arrangement, together with current statements and any known death-benefit information. Include benefits linked to current or former employment. Do not assume that a small or old scheme is irrelevant, but do not invent values where the provider needs to confirm them.
Check the names and contact details recorded for potential beneficiaries and note when nominations were last reviewed. Gather your will, property ownership information, a broad asset and liability list and relevant records of gifts. Your adviser may need more detail through a secure process.
Ask who should lead the different parts of the review. Will drafting, inheritance-tax calculations and regulated pension advice are not necessarily the same service. Written scopes and clear communication between advisers can help avoid gaps without implying that one person is qualified for every part.
Treat April 2027 as a review point, not a sales deadline
The sensible response is to check whether your existing plan still reflects your wishes and needs under the applicable rules. A revised will, nomination or record-keeping arrangement might be relevant, but none should be changed simply because a provider describes a product as a once-only opportunity.
This guide has been reviewed and approved by Kamal Solanki. Readers should still check the latest HMRC technical notes and any subsequent legislation or guidance before acting, because a clearly dated educational article is not a promise that the law or implementation process will remain unchanged.
Inherita's inheritance-tax planning service can be a starting point for an estate-planning discussion. Use the consultation form or telephone link below, explain that pensions are part of your question and ask what specialist or regulated advice may be needed. No pension transaction should be agreed on the strength of this guide alone.
Sources and further reading
Check current official guidance and the specialist commentary linked below. These sources support general information, not advice on your individual circumstances.
Common questions
Does the change apply to deaths before 6 April 2027?
HMRC states that the new regime applies to deaths on or after 6 April 2027. Earlier deaths remain under the current rules even if benefits are paid afterwards.
Will every pension death benefit be subject to inheritance tax?
No. The rules cover most unused funds and death benefits, but specified exclusions and beneficiary exemptions can matter. The scheme and particular benefit need checking.
Should I withdraw my pension before April 2027?
This guide makes no such recommendation. Withdrawals can create income tax and reduce retirement security without necessarily reducing inheritance tax. Seek suitable individual advice first.
Talk through what may fit your circumstances.
Estate and inheritance-tax planning can be a useful next step when you are ready to explore your options.