What is changing?
For deaths on or after 6 April 2027, most unused pension funds and pension death benefits are added to the value of the estate. They then share the same tax-free allowances as your home and savings. Anything above the allowances is taxed at 40%.
The example in the calculator
A single parent has a £400,000 home, £150,000 of savings and a £300,000 defined contribution pension they have not touched. Everything goes to their children.
| Death before 6 April 2027 | Death on or after 6 April 2027 | |
|---|---|---|
| Home + savings | £550,000 | £550,000 |
| Pension counted | £0 | £300,000 |
| Estate | £550,000 | £850,000 |
| Allowances (£325,000 + £175,000) | £500,000 | £500,000 |
| Taxable | £50,000 | £350,000 |
| Inheritance tax at 40% | £20,000 | £140,000 |
The pension adds £300,000 to the taxable amount, so the bill rises by £120,000.
What stays outside?
- Pensions left to a husband, wife or civil partner stay exempt, just like other assets.
- Death-in-service benefits from a workplace scheme are excluded.
- Dependants’ scheme pensions (for example a defined benefit widow’s pension) are excluded.
- Charity lump sums remain exempt.
Who pays the tax?
The personal representatives (the executors) still report the estate. The tax on the pension part can be paid by the pension scheme out of the pot, so the family does not have to find the money themselves. If you die aged 75 or over, beneficiaries may also pay income tax on what they later draw from an inherited pot.
A bigger pension can also shrink the home allowance
Because the pension now counts towards the estate, it also counts towards the £2 million taper. A large pension can push an estate over £2 million and start to reduce the £175,000 residence band.
What can you do now?
- Check your nomination form with your pension provider, so they know who you want to benefit.
- Think about how you will draw income. Some people now plan to use their pension earlier and keep ISAs or other savings for later. Everyone’s case differs, so a regulated adviser is worth talking to.
- Gifts out of surplus income can be exempt straight away if they are regular and do not affect your standard of living.
Change the “Date of death” box in the calculator to see your own before-and-after numbers.
Married or in a civil partnership?
If you leave your pension to your husband, wife or civil partner, it stays free of inheritance tax, as before. The question becomes important on the second death, when the survivor’s estate may now include both pots. Choose “Widowed” in the calculator and add the combined pension to see how it looks. With a late spouse’s allowances transferred, up to £1 million can still pass tax-free if the home goes to children or grandchildren and the estate stays under £2 million.
FAQ
Will my pension be subject to inheritance tax?
Yes, for deaths on or after 6 April 2027 most unused pension pots count as part of the estate. Pensions left to a spouse or civil partner remain exempt.
How much more tax could a £300,000 pension cost?
In this example (single, £400,000 home to children, £150,000 savings) the bill rises from £20,000 to £140,000 — the whole £300,000 is taxed at 40%.
Is a death-in-service payment included?
No. Death-in-service benefits from a registered pension scheme are excluded, as are dependants’ scheme pensions.
Sources: GOV.UK policy paper “Inheritance Tax thresholds” (26 Nov 2025) — gov.uk/government/publications/inheritance-tax-thresholds; GOV.UK “Inheritance Tax on pensions: liability, reporting and payment”; GOV.UK press release “Inheritance tax reliefs threshold to rise to £2.5m” (Dec 2025); Inheritance Tax Act 1984 Sch 1A (36% rate). Autumn Budget 28 Oct 2026: no change to the thresholds (HCR Law overview, 30 Oct 2026). Checked 5 November 2026.