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The post-75 double charge: IHT plus income tax on inherited pensions
A pension left on a death at 75 or older can meet inheritance tax at death and income tax when the money is drawn. But an enacted rule stops both taxes hitting the same slice.
Based on Finance Act 2026, HMRC’s May 2026 “Inheritance Tax on pensions” technical note, and technical guides from M&G, Royal London and abrdn.
7 min read · Last reviewed
— In short
If someone dies at 75 or older from 6 April 2027, their unused pension can be caught twice: inheritance tax when it is counted in the estate, and income tax when the person inheriting draws it. The two do not fall on the same money — Finance Act 2026 takes the part used to pay inheritance tax out of the income that gets taxed. HMRC’s guidance on how to claim that is still to come.
Put the rule to work
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Here is the worry people have about post-75 deaths. The age-75 income-tax rule does not go away when the new inheritance-tax rules arrive. So if someone dies at 75 or older on or after 6 April 2027, their unused pension can be caught by both taxes: inheritance tax, because it now counts in the estate, and income tax, because a post-75 death benefit is taxed as the income of whoever inherits it. The good news is the two do not pile onto the same money.
Two taxes, but not on the same slice
The rule that stops the overlap is simple in effect: where inheritance tax has been paid on a pension death benefit, the part of the benefit that went to pay that tax (and any interest) is taken out of the income that gets taxed. Income tax then applies only to what is left, at the beneficiary’s own rate. So the same pound is never taxed twice — income tax lands on the residue, not on the slice already used up by inheritance tax.
- Unused pension at death
- Included in the IHT account from 6 April 2027
- Scheme pays IHT directly
- Benefit is reduced before income tax under s.226B
- Beneficiary or PR bears IHT and interest
- Income deduction under s.567B
- Qualifying IHT is later refunded
- s.579CB may apply where its conditions are met
- Remaining inherited pension benefit
- Taxed as beneficiary pension income
How it works depends on who pays
Which mechanism removes the overlap comes down to who actually pays the inheritance tax. If the scheme pays HMRC directly (under a Pensions Direct Payment Scheme notice), it reduces the benefit first, then income tax applies to the smaller amount. If the personal representatives pay and the beneficiary bears the pension’s share — by reimbursing them or taking a smaller share of the estate — the income reduction follows that. And if the beneficiary simply draws the pension first and income tax is charged on the whole lot, HMRC says they will need to sort out the income-tax position with it afterwards.
The three funding routes, set out without ranking them, are in the pension IHT payment-routes guide. Each one depends on the estate, the scheme and the benefit still being available.
What is settled, and what is still to come
The numbers are settled. For a scheme-direct payment, the ordinary IHTA 1984 s.226B route taxes the benefit after the scheme has paid the inheritance tax. Where a beneficiary or personal representatives bear the pension’s inheritance tax and interest, ITEPA 2003 s.567B provides the income deduction. Section 579CB may apply to a qualifying later refund where its registered-scheme, age-at-death and refund-path conditions are met. The enacted statutory arithmetic is not provisional.
What is not yet settled is the paperwork: HMRC’s claim, process and timing guidance, and the information-sharing implementation. Those steps need a re-check once the regulations and guidance are published.
The wider death-benefit framework is in pensions, death benefits and inheritance tax; the enacted April 2027 scope is in pensions and inheritance tax from April 2027. Use the Pension IHT calculator for the estate comparison; post-75 income-tax and payment-route workings remain separate. For planning and illustration only; not financial or tax advice.
Finance Act 2026 · IHTA 1984 s.226B (scheme-direct net benefit) · ITEPA 2003 s.567B (beneficiary/PR income deduction) · s.579CB (qualifying later IHT refund where its conditions are met) · s.637T (IHT-adjusted lump sums / LSDBA) · HMRC “Inheritance Tax on pensions” technical note §§8.1–8.3 · M&G / Professional Paraplanner · Royal London · abrdn
Common questions
- Are inherited pensions taxed twice after age 75 from April 2027?
- Two taxes can apply: inheritance tax when the pension is included in the estate and income tax when a post-75 death benefit is taken. The enacted offset removes the IHT-and-interest-equivalent portion from taxable pension income, so income tax is not intended to apply to that same slice.
- How does the post-75 pension income-tax offset work?
- The enacted mechanism depends on the payment route. A scheme-direct IHT payment reduces the benefit before income tax under the ordinary IHTA 1984 section 226B route. Where the beneficiary or personal representatives bear the pension’s IHT and interest, ITEPA 2003 section 567B provides the deduction. Section 579CB may apply to a qualifying later refund where its registered-scheme, age-at-death and refund-path conditions are met.
- Are the post-75 offset rules final?
- The statutory numerical treatment is enacted in Finance Act 2026; it is not provisional. At the 20 July 2026 review date, HMRC’s claim, process and timing guidance and the information-sharing implementation were still pending, so those operational steps must be rechecked when published.
Sources & grounding
HMRC technical note §§8.1–8.2: death benefits after age 75 are taxable; where IHT is paid, the portion corresponding to IHT and interest does not count towards the beneficiary's taxable income, with route-dependent administration but a consistent intended effect. https://www.gov.uk/government/publications/inheritance-tax-on-pensions-technical-note/technical-note-inheritance-tax-on-pensions
Primary sources:https://www.gov.uk/government/publications/inheritance-tax-on-pensions-technical-note/technical-note-inheritance-tax-on-pensions
Finance Act 2026 enacted the pension-IHT changes: an ordinary IHTA 1984 s.226B scheme-direct route taxes the benefit after the scheme's IHT payment; ITEPA 2003 s.567B provides a deduction where the beneficiary or personal representatives bear IHT and interest; s.579CB may apply where its conditions are met for a qualifying later IHT refund after a death at or after 75 under a registered scheme; and s.637T is the separate IHT-adjusted lump-sum/LSDBA calculation. https://www.legislation.gov.uk/ukpga/2026/11/contents/enacted
Primary sources:https://www.legislation.gov.uk/ukpga/2026/11/contents/enactedITEPA 2003 s.567B provides a deduction where the beneficiary or personal representatives bIHTA 1984 s.226B scheme-direct route taxes the benefit after the scheme's IHT payment
Claim mechanics cross-check: M&G / Professional Paraplanner says the exact reduction process is still awaited; Royal London and abrdn corroborate the offset and route mechanics. https://professionalparaplanner.co.uk/technicalzone/interaction-of-income-tax-and-iht-on-pensions-post-april-2027/ · https://adviser.royallondon.com/technical-central/pensions/death-benefits/inheritance-tax-on-pension-death-benefits-from-april-2027/ · https://techzone.aberdeenadviser.com/public/pensions/Tech-guide-pensions-IHT
For planning and illustration purposes only. Verify all inputs against source documents. This explainer does not constitute financial or tax advice.