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ARTICLE · 04 NOVEMBER 2026

Pensions And Inheritance Tax - What Changes On 6 April 2027?

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From April 2027, pension funds will be included in inheritance tax calculations for the first time, fundamentally changing estate planning for thousands of families. While most estates will remain unaffected, those with substantial pension wealth face combined tax rates of up to 67% when inheritance tax and income tax interact, making the timing and destination of pension benefits a critical consideration that requires immediate review of wills, nominations, and withdrawal strategies.

United KingdomTax
Michelle Rose
Michelle Rose

For the past decade, pension savings have occupied an unusual and rather favourable corner of the tax system. Because most modern schemes pay death benefits at the discretion of their trustees, unused pension funds have generally sat outside the deceased's estate for inheritance tax purposes. That has made pensions an efficient way to pass wealth down a generation, and it has shaped a good deal of retirement planning advice.

From 6 April 2027, that changes. Most unused pension funds and pension death benefits will be counted as part of the estate when inheritance tax is calculated.

This is now settled law

The change was announced at the Autumn Budget 2024 and consulted on through 2025. It is no longer a proposal. Finance Act 2026 received Royal Assent on 18 March 2026 and made the necessary amendments to the inheritance tax and pensions legislation.

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