When do pensions become subject to inheritance tax?

For deaths on or after 6 April 2027. From that date most unused pension funds and pension death benefits are included in the value of the deceased’s estate for inheritance tax, alongside their other assets.

Who pays the inheritance tax on a pension from 2027?

The deceased’s personal representatives are liable for reporting and paying it. The government originally consulted on making pension scheme administrators liable but confirmed in July 2025 that personal representatives would bear the responsibility.

What pension death benefits are exempt from the 2027 inheritance-tax change?

Death-in-service benefits from a registered pension scheme and dependants’ scheme pensions (from defined-benefit or collective-money-purchase arrangements) are excluded. Benefits passing to a surviving spouse, civil partner or registered charity keep the existing inheritance-tax exemptions.

Does the 2027 change replace the income tax on inherited pensions?

No. It adds an inheritance-tax charge on the unused fund; it does not repeal the existing income-tax treatment of death benefits (which turns on whether the member died before or after age 75). Both sets of rules are in point from 2027.

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Part of the Pensions, IHT & death benefits guide →

Pensions and inheritance tax from April 2027: what is changing

For deaths on or after 6 April 2027, unused pension funds are brought within inheritance tax. The scope, the personal-representative reporting route, and the figures HMRC published.

Based on the gov.uk policy paper "Inheritance Tax: unused pension funds and death benefits" and its July 2025 consultation response (deaths on or after 6 April 2027).

6 min read · Last reviewed 19 Jun 2026

For deaths on or after 6 April 2027, most unused pension funds and pension death benefits are brought within inheritance tax — included in the value of the deceased’s estate alongside their other assets. The change was announced at the Autumn 2024 Budget and confirmed in the government’s July 2025 consultation response. This explainer sets out the published scope; ParaplanAI does not compute inheritance tax, so there is no calculator here.

What is in scope — and what is not

In scope are most unused pension funds and the pension death benefits paid from discretionary schemes. Several things are expressly excluded or exempt:

Scope of the 6 April 2027 change (gov.uk policy paper)

Unused defined-contribution funds / discretionary death benefits: In scope
Death-in-service benefits from a registered scheme: Excluded
Dependants’ scheme pensions (DB / collective money purchase): Excluded
Benefits to a surviving spouse or civil partner: Exempt (existing IHT rule)
Benefits to a registered charity: Exempt (existing IHT rule)

The spouse/civil-partner and charity exemptions are the ordinary inheritance-tax exemptions, carried across to pensions — so a fund left to a surviving spouse remains exempt, as it would be for any other estate asset.

Who reports and pays it

The personal representatives of the estate are liable for reporting and paying the inheritance tax due on the unused pension funds and death benefits. This was a notable change of direction: the government initially consulted on placing the liability on pension scheme administrators, and confirmed in the July 2025 response that personal representatives would carry it instead.

Because the money sits with the scheme rather than in the estate’s bank account, the rules give the personal representatives a route to fund the charge: where they reasonably expect inheritance tax to be due, they may direct the scheme administrator to withhold up to 50% of the taxable benefits for up to 15 months from the date of death, pay the inheritance tax to HMRC, and then release the balance to the beneficiaries.

How many estates it affects

The government’s published estimates put the scale of the change in context.

Official impact estimates, 2027–28 (gov.uk)

Estates with inheritable pension wealth: ~213,000
Newly liable to inheritance tax: ~10,500
Paying more inheritance tax than before: ~38,500
Average increase in IHT liability (with pensions included): ~£34,000

These are the figures HMRC published, not estimates of our own. The change sits alongside the existing income-tax treatment of death benefits — the age-75 line — which it does not repeal; how the two interact in a given case is set by the final legislation. The income-tax side, and the lump sum and death benefit allowance, are covered in pensions, death benefits and inheritance tax and the LSDBA explainer.

This is announced legislation taking effect for deaths on or after 6 April 2027; the detail should be confirmed against the published rules. The primary source is the gov.uk policy paper Inheritance Tax: unused pension funds and death benefits. For planning and illustration only; this explainer states the rules and does not constitute financial, tax or estate-planning advice.

gov.uk “Inheritance Tax: unused pension funds and death benefits” (deaths on or after 6 April 2027) · July 2025 consultation response · PTM173000 (income tax on death benefits)

Common questions

When do pensions become subject to inheritance tax?: For deaths on or after 6 April 2027. From that date most unused pension funds and pension death benefits are included in the value of the deceased’s estate for inheritance tax, alongside their other assets.
Who pays the inheritance tax on a pension from 2027?: The deceased’s personal representatives are liable for reporting and paying it. The government originally consulted on making pension scheme administrators liable but confirmed in July 2025 that personal representatives would bear the responsibility.
What pension death benefits are exempt from the 2027 inheritance-tax change?: Death-in-service benefits from a registered pension scheme and dependants’ scheme pensions (from defined-benefit or collective-money-purchase arrangements) are excluded. Benefits passing to a surviving spouse, civil partner or registered charity keep the existing inheritance-tax exemptions.
Does the 2027 change replace the income tax on inherited pensions?: No. It adds an inheritance-tax charge on the unused fund; it does not repeal the existing income-tax treatment of death benefits (which turns on whether the member died before or after age 75). Both sets of rules are in point from 2027.

Sources & grounding

Every fact is quoted from the gov.uk policy paper "Inheritance Tax: unused pension funds and death benefits" and its July-2025 consultation response / technical note (verified 2026-06-19): effective for deaths on or after 6 April 2027; most unused pension funds + pension death benefits from discretionary schemes in scope.
Liability: personal representatives are liable for reporting and paying the IHT (the government consulted on making scheme administrators liable and changed position in the July 2025 response).
Exclusions/exemptions: death-in-service benefits from a registered scheme and dependants’ scheme pensions (DB / CMP) excluded; the spouse/civil-partner and charity exemptions maintained.
Payment mechanism: PRs may direct scheme administrators to withhold up to 50% of the taxable benefits for up to 15 months from the date of death to settle the IHT before the balance is released (gov.uk).
Impact statistics (2027–28): ~213,000 estates with inheritable pension wealth; ~10,500 newly liable to IHT; ~38,500 paying more; average IHT liability up ~£34,000. The product computes no IHT (Decision C1) — this is educational only.

For planning and illustration purposes only. Verify all inputs against source documents. This explainer does not constitute financial or tax advice.