Everything you need to know about the April 2027 Inheritance tax and pension changes?

The upcoming inheritance tax and pension changes could affect how much of your legacy your loved ones receive after your death. From 6 April 2027, most unused pension funds and pension death benefits will be included in the value of your estate when calculating Inheritance Tax (IHT). While this doesn’t mean every pension will automatically incur tax, it could increase the tax liability for some families. 

Understanding the UK inheritance changes now can help you review your financial plans, understand the potential impact on your beneficiaries and prepare for the new rules. 

We’re hosting a webinar on the 24th November covering the upcoming Inheritance Tax and pension changes. In this webinar our experts will cover what the changes might mean for you, the risks to consider and how you can plan ahead with confidence. Sign up for the webinar today.  

What is inheritance tax?

Inheritance Tax is a tax on the estate of someone who has died. An estate can include property, savings, investments and other assets, after accounting for relevant liabilities. 

Currently, many pension death benefits can be passed to beneficiaries outside the deceased’s estate for IHT purposes, particularly where the pension scheme trustees have discretion over who receives the benefits. However, the government is changing this approach to make the tax treatment of inherited pension wealth more consistent with other assets. 

What are the April 2027 Inheritance Tax and Pension changes?

The inheritance tax and pension changes are due to take effect on 6 April 2027. Under the new rules, most unused pension funds and pension death benefits will be included in the deceased’s estate when calculating IHT.  

The changes will apply to both defined contribution (DC) and defined benefit (DB) pension schemes, although certain benefits will remain exempt. This means that if your estate, including your unused pension funds, exceeds the available IHT allowances, your beneficiaries could face a higher tax bill than they would under the current rules. 

Who will be affected by the inheritance tax and pension changes?

The inheritance tax and pension changes are particularly relevant to people with substantial pension savings who intend to pass unused funds on to their loved ones. 

Those most likely to be affected include: 

• Pension holders 

• Beneficiaries 

• Personal representatives 

What are the next steps you should consider ahead of the changes?

With April 2027 approaching, taking time to review your financial arrangements could help you prepare for the inheritance tax and pension changes. 

Ahead of the changes, you should consider following these steps: 

• Review your estate 

• Review your pension arrangements 

• Update your estate planning 

• Seek professional advice 

Preparing for the inheritance tax and pension changes

The inheritance tax and pension changes represent an important shift in how inherited pension wealth will be treated from April 2027.  

Understanding the new rules and reviewing your pension arrangements can help you make informed decisions before the changes take effect. Planning ahead is key to understanding the potential implications for your estate and the people you wish to benefit from it. 

To find out more about the upcoming inheritance tax and pension changes, and how our private client and wealth experts can help you prepare, read our IHT guide here: READ OUR GUIDE