by Asim Abbas
12 November 2026 
Pensions and Inheritance Tax from April 2027: what to do now
Pensions and Inheritance Tax from April 2027: what to do now
From 6 April 2027, most unused pension funds and death benefits will be included in your estate for Inheritance Tax.
- Unused pensions in the estate from April 2027
- Spouse transfers remain exempt
- Death-in-service benefits are excluded
- Beneficiaries may also pay Income Tax if you die after 75
For many families, pensions were a key way to pass on wealth outside the estate. That’s changing, and in some cases beneficiaries may face both IHT and Income Tax on the same money.
This guide explains the change and practical steps to consider now.
What’s changing
Pension funds you haven’t drawn will count towards your estate when you die. Personal representatives will be responsible for reporting and paying any IHT, working with pension schemes. Funds left to a spouse or civil partner remain exempt, and charity beneficiaries are also exempt.
The double tax issue
If you die after 75, beneficiaries already pay Income Tax on withdrawals. From April 2027, IHT may also apply first, so the effective combined rate can be high for a higher rate taxpayer beneficiary.
Free tax calculators
Explore your position.
Ken, a widower, dies at 80 in 2028 with a £400,000 estate, his home going to his children, and a £300,000 pension. His nil rate bands total £1 million, so the £700,000 total is covered and no IHT is due. If his estate were £900,000 plus the pension, £200,000 would be taxable at 40%, and his children would also pay Income Tax when they draw the pension.
Fixed-fee accountancy support
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Get a fixed-fee quoteCall 0161 531 4179Steps to consider now
- Value your pensions alongside your other assets
- Review nominations of beneficiaries
- Consider drawing more income and spending or gifting it
- Make regular gifts from surplus income, which can be IHT-free
- Consider life insurance written in trust
- Review your will and residence nil rate band
Rethinking the order of spending
Many advisers previously suggested spending other assets first and leaving pensions untouched. With pensions in the estate, that may change, though Income Tax on withdrawals still matters.
See GOV.UK’s policy paper on IHT on unused pensions, our IHT 2026 guide and our IHT planning service.
What should I do next?
And other assets.
Beneficiaries.
IHT-free.
Frequently Asked Questions
Are pensions subject to IHT from 2027?
Yes, most unused pension funds will be included in the estate from 6 April 2027.
Are pensions left to a spouse taxed?
No, spouse transfers remain exempt.
Are death-in-service benefits included?
No, they are excluded.
Can beneficiaries pay IHT and Income Tax?
Yes, if the member dies after 75.
What can I do now?
Review nominations, gifts, wills and insurance.
Need help with this? Wingate Accountants offers fixed-fee online accountancy support across the UK. Call 0161 531 4179 or request a quote at wingateaccountants.co.uk.
About the Author
Ali Imran
I’m Ali Imran, an accountant at Wingate Accountants. I help sole traders, landlords and directors get their returns filed early and accurately, without the last-minute panic.
