Pensions and inheritance tax: what changes in April 2027

Until now, most unused defined contribution pensions passed on outside your estate for inheritance tax. HMRC has confirmed that from 6 April 2027 most unused pension funds and death benefits will be brought into the value of your estate.

Some benefits stay outside: death in service benefits from a registered pension scheme, and dependant's scheme pensions from defined benefit or collective money purchase arrangements.

The person dealing with the estate (the personal representative) will be responsible for reporting and paying any inheritance tax due on the pension.

There's normally no inheritance tax to pay if your estate is under £325,000, or if you leave everything above that to your spouse, civil partner or a charity.

If you leave your home to your children or grandchildren, your threshold can rise to £500,000. Married couples and civil partners can pass any unused threshold to each other.

The standard rate is 40%, charged only on the part above the threshold. GOV.UK's example: an estate worth £500,000 with a £325,000 threshold pays 40% of £175,000.

Leaving 10% or more of your net estate to charity can reduce the rate to 36% on some assets.

Gifts given less than seven years before you die may be taxed. If the total of gifts in those seven years is over the £325,000 threshold, taper relief reduces the tax on gifts made 3 to 7 years before death: 32%, 24%, 16% then 8%. After seven years, 0%.

Gifts you still benefit from — for example giving your home to a relative but still living in it — count as part of your estate. Last-minute gifts do not escape the rules.

Annual exemption: £3,000 of gifts in total each tax year, and you can carry one unused year forward.

Small gifts: up to £250 per person each tax year (not to someone who received your £3,000 allowance).

Wedding or civil partnership gifts: up to £5,000 to a child, £2,500 to a grandchild, £1,000 to anyone else.

Regular gifts from income: no limit if you pay from regular income and can still afford your usual living costs — for example helping with a child's rent.

Gifts to a spouse, civil partner, charity or political party are exempt.

Confirmed and already law: from 6 April 2027 most unused pension funds and death benefits will be brought into the value of an estate for inheritance tax. This is set out in Finance Act 2026, which has already received Royal Assent. HMRC technical note

Confirmed and already law: death in service benefits from a registered pension scheme, and dependant's scheme pensions from defined benefit or collective money purchase arrangements, are excluded from the change.

Confirmed and already law: personal representatives (not pension scheme administrators) will be responsible for reporting and paying any inheritance tax due on pensions.

Nothing further about pensions and inheritance tax has been announced for the 28 October 2026 Budget — treat any reports of additional changes as speculation until GOV.UK or HMRC confirm them.

Roughly what is my estate worth today, including my pensions?

Who have I named on my pension nomination forms, and is my will up to date?

Could I make regular gifts from income now without affecting my own security?

Am I keeping enough for my own later life and care? Giving too much away too soon is a real risk.

Make a note of gifts and dates — your executors will need it.

Inheritance tax and pension planning are complex and depend on your circumstances. This guide is general education. Before acting, speak to an FCA-regulated financial adviser, a solicitor or a tax adviser. MoneyHelper offers free, impartial pension guidance, and GOV.UK has the official rules.