Pension IHT from April 2027: the personal representatives’ step-by-step

From 6 April 2027 the personal representatives — the executors or administrators — report and pay inheritance tax on most unused pension money as part of the estate. Two companion guides cover the three ways the tax can be paid and what is already law and what guidance is still due. This one puts the work in order.

Step 1: ask each scheme for its value

The personal representatives contact every pension scheme the person belonged to, and any insurer paying them an annuity, and ask for two things: the value of the unused pension (the rules call it notional pension property) and how it splits between exempt beneficiaries, such as a surviving spouse, civil partner or charity, and everyone else. HMRC's technical note says each scheme should give the value within 28 days of receiving the request, and the split by the later of 28 days from the request or 14 days after the beneficiaries are decided. The clock starts with the personal representatives' formal request, not with the scheme first hearing of the death.

Step 2: value the whole estate

The pension values are added to everything else, and one inheritance-tax calculation runs over the lot, with the usual nil-rate bands. Some benefits never enter the estate at all (see death-in-service benefits); amounts going to a spouse or civil partner enter and are then exempt (see the spouse exemption). If an inheritance-tax account is needed, the personal representatives then ask each scheme for the beneficiaries' names, addresses and National Insurance numbers and the value going to each, on the same later-of-28-days-or-14-days timetable.

A worked estate: two pensions

This estate is one of ParaplanAI's pension-IHT test cases, and every figure below is read from it. The person died on 6 April 2027. The rest of the estate is worth £700,000, with no home passing to children or grandchildren, so no residence nil-rate band. There are two pensions, £400,000 in scheme A and £250,000 in scheme B, both going to beneficiaries who are not exempt. One £325,000 nil-rate band is available and nothing is transferred from an earlier death.

The estate owes £410,000 in total, of which £260,000 arises because the pensions now count. Each scheme and beneficiary still needs to know how much of the bill relates to their pension. HMRC has not yet published its pension-attribution calculation, so the split below is ParaplanAI's modelled share of the whole bill, in proportion to each item’s value in the estate (£700,000 / £400,000 / £250,000): modelled, not HMRC’s method (see how the bill is split).

Together the pensions’ modelled shares come to £197,407.41. That is a share of the whole bill, not the same figure as the £260,000 increase from counting the pensions.

Step 3: decide whether to hold benefits back

Where the personal representatives know, or have reason to believe, that inheritance tax may be due on the pension, they can give a scheme a withholding notice. It makes the scheme hold back up to 50% of each non-exempt beneficiary's entitlement (IHTA 1984 s.226A). Benefits going to an exempt beneficiary, and excluded benefits, are not caught. HMRC says the power is not meant to be used routinely. A notice can be given at any time from the date of death until 15 months after the end of the month in which the member died.

Step 4: report and pay

The personal representatives submit the inheritance-tax account and pay the tax due before applying for probate. Tax on the pension is due at the end of the sixth month after the date of death, like the rest of the estate. The cash can come from the estate, from the beneficiary, or from the scheme: a personal representative or a beneficiary can give the scheme a direct-payment notice for an exact amount of at least £1,000, and the scheme pays HMRC within 35 days of receiving it (IHTA 1984 s.226B). The detail of each route is in the three payment routes.

Step 5: after the due date

After the due date, late payment interest accrues on any tax still outstanding. A withholding notice ends at the earliest of being withdrawn, the tax and interest being paid, or the 15-month long-stop. Once a beneficiary becomes entitled to a benefit they are jointly and severally liable with the personal representatives for the tax on it, and if the value of the estate later changes, it stays the personal representatives' job to tell HMRC.

The wider picture is in pensions, death benefits and inheritance tax and pensions and inheritance tax from April 2027. The Pension IHT calculator shows the estate with and without an evidenced pension value. For planning and illustration only; this guide describes the process and is not legal, tax or estate-planning advice.

Finance Act 2026 · IHTA 1984 ss.150A, 226A–226B · SI 2026/818 · HMRC “Inheritance Tax on pensions” technical note §§2.2–2.3, 5.2–5.3, 6–7, 10.1