How the April 2027 pension change affects your inheritance tax

Under the government's announced plans, most unused pension funds and death benefits are expected to count towards the estate for Inheritance Tax from 6 April 2027. Until then, unused pensions have usually sat outside the estate, so for many families this is the first time pension savings will appear in the Inheritance Tax sums at all.

No. If your estate plus your unused pension stays within your available allowances, the change is expected to make no difference to the tax position. It matters most where a pension pushes an otherwise below-threshold estate over the line, or where a larger combined total starts to taper away the residence nil-rate band. This calculator shows which side of that line your figures sit on.

Transfers between UK-domiciled spouses and civil partners are exempt from Inheritance Tax, and that exemption is expected to continue to apply. In practice the change typically matters on the second death, when the combined estate — now expected to include unused pensions — passes to the next generation. The calculator's 'married or civil partnership' option models that combined-allowance position.

Yes, that interaction is one of the less obvious effects. The residence nil-rate band tapers away by £1 for every £2 an estate exceeds £2,000,000. If counting a pension takes the combined total over that threshold, the change can both add the pension to the taxable estate and shrink an allowance at the same time. The calculator applies the taper in both scenarios so the comparison reflects it.

No. We are estate planners, not pension or investment advisers, and we do not advise on pension products or what to do with a pension — that is regulated financial advice requiring FCA authorisation. This tool only shows how the announced change could affect Inheritance Tax exposure. Our work — wills, lasting powers of attorney and trusts — is not regulated by the FCA.

Sooner rather than later. Estate planning generally works best with time on your side, and reviewing your position before April 2027 means more options stay open. Even if the calculator suggests the change does not move your position today, values and rules change — a periodic review confirms your plan still does what you intend.

No. Anything passing to a spouse or civil partner is exempt from Inheritance Tax, and that includes pensions — the 2027 change does not alter the exemption. What it can change is the position on the second death: once unused pensions are expected to count towards the estate, the combined total passing to the next generation may be larger, which is when Inheritance Tax typically becomes relevant.

Separately from Inheritance Tax, withdrawals from an inherited pension can be taxed as the beneficiary's own income. Under current rules, where death is after age 75 — and in some cases after the 2027 change — what a beneficiary draws out is added to their income for the year and taxed at their marginal rate. The amount therefore depends entirely on each beneficiary's own tax position, which is why this calculator shows the Inheritance Tax side only and does not attempt to estimate income tax.

Because of the residence nil-rate band taper. Above £2,000,000, that allowance reduces by £1 for every £2 the estate exceeds the threshold. If counting a pension from April 2027 pushes an estate into — or further into — that taper, the change adds the pension to the taxable estate and shrinks an allowance at the same time. The combined effect can exceed 40% of the pension value alone, and the calculator applies the taper in both scenarios so the comparison reflects it.