Inheritance tax on pensions from 6 April 2027: the executor's job and the adviser's conversation
The rule is law and the date is fixed. Read from the primary text: who reports, who pays, what is excluded, and what the Budget of 28 October 2026 proposes.
Since 2015 the pension has been rather a good place to leave money one did not need. From 6 April 2027 it joins the rest of the estate, and the executor, who may well be a daughter with a day job, inherits the correspondence. This page sets out what the Act says. The conversation it prompts is yours, and I would not presume.
In short
Inheritance tax on pensions applies to deaths on or after 6 April 2027 under Finance Act 2026, which received Royal Assent on 18 March 2026. HMRC estimated on 26 November 2025 that, of around 213,000 estates with inheritable pension wealth in 2027 to 2028, 10,500 become newly liable and approximately 38,500 pay more. Personal representatives report and are liable for the tax, and death-in-service benefits are excluded.
Key takeaways
- Finance Act 2026, Royal Assent 18 March 2026, treats a scheme member as beneficially entitled to "notional pension property" for deaths on or after 6 April 2027.
- HMRC's note of 26 November 2025 estimates that 10,500 estates become newly liable in 2027 to 2028 and approximately 38,500 pay more, with the average liability rising by around £34,000, and calls those estimates a maximum.
- Under the Act of March 2026 a personal representative may direct a scheme to hold back up to 50 per cent of a beneficiary's entitlement for up to 15 months after the end of the month of death.
- The Budget of 28 October 2026 kept the regime and proposed smaller measures in Finance Bill 2026-27, including a direct payment route for prospective personal representatives and the end of the two-year rule for payments on or after 28 October 2026.
Is inheritance tax on pensions already law?
Yes for the core rule. Sections 66 to 71 of Finance Act 2026 are enacted, and section 71 applies them to deaths, and so far as relevant other transfers of value, on or after 6 April 2027. A member who dies before that date stays under the current rules, even if benefits are paid afterwards, on HMRC's technical note updated 29 May 2026.
The Budget of 28 October 2026 did not reverse or delay the regime; its overview of legislation (updated 5 November 2026) says its technical changes "do not affect" the impact published in 2025. Its measures are proposed, not enacted: Finance Bill 2026-27 had its first reading on 3 November 2026, and Parliament's bill record on 8 November 2026 showed no second reading sitting yet.
| Item | Status as at 8 November 2026 | Effect |
|---|---|---|
| Finance Act 2026, sections 66 to 71 | Enacted, Royal Assent 18 March 2026 | Deaths on or after 6 April 2027 |
| SI 2026/818, information sharing | Made 13 July 2026, laid 15 July 2026 | In force 6 April 2027 |
| Prospective personal representative may give a payment notice "when certain conditions are met" | Announced 28 October 2026, Finance Bill 2026-27 | From 6 April 2027 |
| Choice of charity component for the reduced rate | Announced 28 October 2026, Finance Bill 2026-27 | From 6 April 2027 |
| Two-year rule removed for death benefits | Announced 28 October 2026, Finance Bill 2026-27 | Payments on or after 28 October 2026 |
| Standalone charge on lump sums above the allowance | Announced 28 October 2026, Finance Bill 2026-27 | Paid on or after 6 April 2024; inheritance tax changes from 6 April 2027 |
| Regulations on excepted estates and split schemes | Planned for autumn to winter 2026 to 2027 in Technical Note 2 | Consequential |
| Technical Note 3 (international cases, income tax, intestacy, charities, trusts) | Planned for autumn 2026; not found on gov.uk on 8 November 2026 | Explanatory |
| Final HMRC guidance | Planned for spring 2027 | Explanatory |
The rows marked as announced rest on the Budget overview of 28 October 2026. Parliament's record lists Bill 173 as published on 4 November 2026, but its text could not be read on 9 November 2026, so this page gives no clause numbers for those measures.
How many estates does inheritance tax on pensions reach from April 2027?
The note of 26 November 2025 says that, "of around 213,000 estates with inheritable pension wealth in 2027 to 2028, 10,500 estates will have an Inheritance Tax liability where previously they would not", and "approximately 38,500 estates will pay more". The note does not say whether the second figure contains the first, so the two are not added here. It expects the average liability to rise by around £34,000 in 2027 to 2028 and says the estimates are static, leaving out "tax planning or drawing down pension funds faster", and "should be viewed as a maximum".
For scale, HMRC's statistics updated 30 July 2026 record 30,400 UK deaths resulting in a charge in the 2023 to 2024 tax year, 4.72 per cent of deaths. HMRC's summary of consultation responses of July 2025 estimates that the pension makes up less than 5 per cent of net estate value in more than half of the taxpaying estates affected in 2027 to 2028, and less than 60 per cent in almost all.
What is in scope, and what is excluded?
New section 150A of the Inheritance Tax Act 1984, inserted by Finance Act 2026 in March 2026, covers registered pension schemes, qualifying non-UK pension schemes and section 615(3) schemes, and HMRC's note of 26 November 2025 says trustee discretion no longer keeps a scheme out. For a member who was not a long-term UK resident, HMRC's note of May 2026 limits the charge to schemes established in the UK. The treatment from 6 April 2027, on the Act and HMRC's technical notes of 2026:
| Benefit on death from 6 April 2027 | Inheritance tax treatment |
|---|---|
| Unused money purchase pot, including drawdown | Notional pension property |
| Defined benefit lump sum death benefit | Notional pension property |
| Guaranteed payments continuing after death under a defined benefits arrangement | Notional pension property, valued on the maximum lump sum assumption |
| Death-in-service benefit from current employment or work | Excluded benefit |
| Dependants' scheme pension, where it may only be paid in that form | Excluded benefit |
| Dependants' or nominees' annuity bought together with the member's lifetime annuity | Excluded benefit |
| Benefit passing to a surviving spouse, civil partner or charity | Included in the value, then exempt on a claim |
Death in service. Under section 150A(6)(d) the amount must be payable only if the member was in employment or other work of a particular description immediately before death. HMRC's note of May 2026 gives the boundary: three times salary qualifies, a refund of contributions in the same payment does not, and benefits from a previous employer's scheme do not. Career breaks and long-term sickness are for the employer or scheme to determine.
The spouse exemption. The Act of March 2026 extends section 18 of the 1984 Act to benefits a spouse or civil partner receives or has a right to receive under the scheme. HMRC's note of May 2026 says the value must still be included in the account and the exemption claimed, and describes the exemption as applying "where they are long-term UK residents". Once benefits vest, what remains forms part of the recipient's own estate at the recipient's death, on Technical Note 2 of 27 August 2026.
Earlier deaths. Technical Note 2 says that even where the original member died before 6 April 2027, a beneficiary who "dies after 6 April 2027" must count what remains of the inherited pension in their own notional pension property.
Reliefs. HMRC's note of May 2026 says business property relief, agricultural property relief, loss on sale relief and instalments are not available on notional pension property; quick succession relief is. The rates for 2027 to 2028, in the Budget 2026 annex updated 5 November 2026, stay at 40 per cent and a £325,000 nil-rate band.
The residence nil-rate band. Section 8D of the 1984 Act tests the taper on "the value of the person's estate immediately before the person's death", and section 150A treats the member as beneficially entitled to the notional pension property for the purposes of that Act. HMRC's statistics of July 2026 describe the taper as £1 for every £2 above £2 million. On those words notional pension property appears to count towards the taper test, but that is the house's reading of the statute: as at 9 November 2026 the house found no HMRC statement saying so in its two technical notes, its note of 26 November 2025 or its summary of July 2025. The point is for the client's own tax adviser.
What does the personal representative have to do, and by when?
The personal representative collects each scheme's value, decides whether an account is needed, reports the pension in it, and pays. The main time limits, as they stand on 8 November 2026, for deaths from 6 April 2027:
| Step | Time limit | Source |
|---|---|---|
| Scheme gives the value of notional pension property, estimated if need be; the exempt split may follow once beneficiaries are decided | Within 28 days of a valid request | SI 2026/818 |
| Tax falls due; interest runs afterwards | Six months after the end of the month of death | Technical Note 2 |
| Account filed and tax paid | Before applying for probate | Technical Note 1 |
| Withholding notice can have effect | Until 15 months after the end of the month of death | Section 226A, 1984 Act |
| Scheme pays under a payment notice of at least £1,000 | 35 days from receipt | Section 226B, 1984 Act |
Schemes must respond before a grant exists. Named executors can act on evidence of identity and authority, and where there is no will or no willing executor a prospective personal representative can request information and give a withholding notice, on Technical Note 2 of August 2026. HMRC's summary of July 2025 says it can in certain circumstances allow a grant on credit, postponing payment until after probate.
HMRC's note of May 2026 says the personal representative should take reasonable steps to identify every scheme. A certificate of discharge protects the personal representative against later-found pensions unless the failure to disclose them was careless, under section 239(4A) as inserted in March 2026, and beneficiaries remain liable for tax on them, on the same note of May 2026.
Who pays, and how does the withholding route work?
The personal representative is liable, and the beneficiary joins that liability when the benefit vests. HMRC's summary of July 2025 says the personal representative's personal liability is limited to the value of the assets passing directly through the estate. Under section 210 of the 1984 Act as substituted in March 2026, trustees of a registered scheme are not liable, and a scheme administrator becomes liable where it pays a benefit in breach of a withholding notice or fails to comply with a payment notice.
Two routes reach the tax from the scheme, both from 6 April 2027 and both limited to registered pension schemes.
| Withholding notice (section 226A) | Payment notice (section 226B) | |
|---|---|---|
| Who may give it, on the Act of March 2026 | Personal representative or prospective personal representative | Personal representative or beneficiary, including a trustee beneficiary |
| Effect | Scheme pays no more than 50 per cent of each person's benefit entitlement | Scheme pays the stated tax to HMRC and adjusts entitlement |
| Condition | Knows or has reason to believe tax may be due | At least £1,000, within the tax for which the giver is liable |
| Ends or runs | On withdrawal, payment of the tax, or 15 months after the end of the month of death | Within 35 days of receipt; no fixed end date for giving one |
A withholding notice does not touch excluded or exempt benefits, and HMRC's note of May 2026 says a personal representative's payment notice should not be deducted from them, and that withholding "is not intended to be used routinely or on a precautionary basis". Notices are given scheme by scheme, and Technical Note 2 of August 2026 puts benefits already secured, such as an annuity, outside withholding.
How does income tax interact after age 75?
Income tax depends on the member's age at death and continues beside inheritance tax. HMRC's note of May 2026 says that if a member dies below 75, survivors' annuities and dependants' drawdown are usually tax-free, as are lump sum death benefits within the lump sum and death benefit allowance, £1,073,100 in 2027 to 2028 on the Budget 2026 annex. For a member who died at 75 or over, the gov.uk guidance read on 8 November 2026 shows income tax deducted by the provider; the note of May 2026 makes charity lump sum death benefits the exception. Dependants' scheme pensions are taxed at the recipient's marginal rate at any age.
Where both taxes apply, the Act of March 2026 gives relief. New section 567B of the Income Tax (Earnings and Pensions) Act 2003 allows a deduction for inheritance tax the beneficiary bears, and HMRC's note of May 2026 says "any Income Tax will be charged on the pension benefits net of Inheritance Tax" where a payment notice is used.
What does the 2027 rule raise with a client?
A fixed date changes the question an adviser will be asked. The primary texts put two practical subjects on the table, each a question for the client's own legal and tax advisers.
- The records. HMRC's note of May 2026 says schemes may want to encourage members to "keep an up-to-date record of all their pension arrangements".
- The cash at six months. Tax on the pension part falls due six months after the end of the month of death and cannot be paid by instalments, on HMRC's notes of 2026. HMRC's note of May 2026 says beneficiaries may pay from non-pension funds. HMRC's view, in the summary of July 2025, is that personal representatives will in most cases be able to pay from the wider estate.
In the house's experience the banker raises it first with a private client, with the help of a financial planner at the same firm if the firm has one.
Pension wealth is not on the public record, and the owner-managed company usually is. An owner with a private company and a pension has both counted in one estate from 6 April 2027, with business property relief possible on the first and unavailable on the second, on HMRC's note of May 2026; the 100 per cent relief allowance is £2.5 million on the Budget 2026 annex updated 5 November 2026. The professionals around such an owner are named filing by filing, which is why the members' voluntary liquidation signal and the £500,000 business asset disposal relief limit, proposed in Finance Bill 2026-27 for disposals from 6 April 2027, belong in the same conversation.
Frequently asked questions
Who pays inheritance tax on a pension after 6 April 2027?
The personal representatives report the pension and are liable for the tax, under Finance Act 2026; beneficiaries become jointly and severally liable once the benefit vests. HMRC's note of May 2026 says neither scheme administrators nor trustees of registered schemes are liable in normal circumstances.
Is death in service subject to inheritance tax from April 2027?
No, where the benefit is payable only because the member was in employment or other work immediately before death, under the Act of March 2026. HMRC's note of May 2026 says a refund of contributions paid alongside it, or a benefit from a previous employer's scheme, does not meet the test.
Does a pension left to a spouse pay inheritance tax from 2027?
Benefits passing to a surviving spouse or civil partner are exempt under section 18 of the 1984 Act as amended in March 2026, but the value is still reported and the exemption claimed; HMRC's note of May 2026 describes it as applying to long-term UK residents. What remains forms part of the spouse's estate on the spouse's later death.
Is a pension inherited after 75 taxed twice?
Both taxes can apply to the same benefit from 6 April 2027, and the Act of March 2026 gives an income tax deduction for inheritance tax the beneficiary bears.
Should someone draw down a pension before April 2027?
This page does not advise on it; that is for the person's own regulated adviser. HMRC's note of 26 November 2025 names faster drawdown as a behaviour that may reduce the number of estates affected.
Method
Every rule here comes from legislation.gov.uk, gov.uk and Parliament's bill record, read on 8 November 2026. Where HMRC's notes and the Act differ the Act is given (HMRC's note of 26 November 2025 counts the 15 months from the date of death; section 226A(7)(c) counts from the end of the month of death), and a later note or regulation is used over an earlier one. Technical Notes 1 and 2 say they are not draft guidance. Nothing here is tax, legal or pensions advice. The house's figures are counts of The Gazette notices with code 2431 and of declarations of solvency the house read in October 2026, measured on 8 November 2026 with measure-ledger.ts.
Sources
All read 8 November 2026 unless stated.
- Finance Act 2026, sections 66 to 71, 2026 c. 11, Royal Assent 18 March 2026: https://www.legislation.gov.uk/ukpga/2026/11/section/66
- Inheritance Tax Act 1984, sections 5 and 8D: https://www.legislation.gov.uk/ukpga/1984/51/section/8D
- The Registered Pension Schemes (Provision of Information) (Miscellaneous Amendments) Regulations 2026, SI 2026/818, made 13 July 2026: https://www.legislation.gov.uk/uksi/2026/818/made
- HMRC, "Inheritance Tax: unused pension funds and death benefits", policy paper, published 26 November 2025: https://www.gov.uk/government/publications/inheritance-tax-unused-pension-funds-and-death-benefits/inheritance-tax-unused-pension-funds-and-death-benefits
- HMRC, "Technical note: Inheritance Tax on pensions", published 11 May 2026, updated 29 May 2026: https://www.gov.uk/government/publications/inheritance-tax-on-pensions-technical-note/technical-note-inheritance-tax-on-pensions
- HMRC, "Technical note 2: Further information on Inheritance Tax and Pensions", published 27 August 2026: https://www.gov.uk/government/publications/inheritance-tax-on-pensions-technical-note-2/technical-note-2-further-information-on-inheritance-tax-and-pensions
- HM Treasury, "Budget 2026: overview of tax legislation and rates", paragraphs 1.17, 1.18, 1.27 and 1.33, updated 5 November 2026: https://www.gov.uk/government/publications/budget-2026-overview-of-tax-legislation-and-rates-ootlar/budget-2026-overview-of-tax-legislation-and-rates-ootlar
- HM Treasury, "Budget 2026: overview of tax legislation and rates, Annex A: rates and allowances", updated 5 November 2026: https://www.gov.uk/government/publications/budget-2026-overview-of-tax-legislation-and-rates-ootlar/annex-a-rates-and-allowances
- HMRC, "Inheritance Tax on pensions: liability, reporting and payment, summary of responses", July 2025: https://www.gov.uk/government/consultations/inheritance-tax-on-pensions-liability-reporting-and-payment/outcome/inheritance-tax-on-pensions-liability-reporting-and-payment-summary-of-responses
- HMRC, "Inheritance Tax liabilities statistics: commentary", updated 30 July 2026: https://www.gov.uk/government/statistics/inheritance-tax-liabilities-statistics/inheritance-tax-liabilities-statistics-commentary
- gov.uk, "Tax on a private pension you inherit": https://www.gov.uk/tax-on-pension-death-benefits
- UK Parliament, Bills API, Finance Bill 2026-27 (bill 4316), stages: https://bills-api.parliament.uk/api/v1/Bills/4316/Stages
- UK Parliament, Bills API, Finance Bill 2026-27 (bill 4316), publications, read 9 November 2026: https://bills-api.parliament.uk/api/v1/Bills/4316/Publications
- The Gazette, notices with code 2431, October 2026, and Companies House declarations of solvency (form LIQ01), measured 8 November 2026.
Winny is the house’s pen name. This page is written by Windfall Intelligence Ltd from the UK public record, every figure re-measured on the date it carries, and checked by a person before publication. How these pages are made. Corrections to hello@joinwindfall.com.
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