Government Confirms How Inheritance Tax on Pensions Will Work From 2027

The consultation ran from 30 October 2024 to 22 January 2025 and received 649 written responses, supported by nine workshops with pension and tax professionals and representative bodies.

What has been decided

Personal representatives, rather than pension scheme administrators, will be liable for reporting and paying the tax on unused pension funds and death benefits. Non-exempt pension beneficiaries will become jointly and severally liable from the point they are appointed. Scheme administrators must give personal representatives the value of the pension within four weeks of being notified of the death.

Death in service benefits paid from registered pension schemes will be outside inheritance tax from 6 April 2027, whether the scheme is discretionary or non-discretionary. The six-month deadline for paying the tax will not be extended, and late payment interest will run after that point. Personal representatives may pay from the free estate, or beneficiaries can direct the scheme administrator to pay HMRC, and no income tax will be charged on the amount equal to the inheritance tax due on the pension.

Who is affected

The government estimates that around 213,000 estates will have inheritable pension wealth in 2027 to 2028. About 10,500 estates, around 1.5% of UK deaths, are expected to become newly liable, and about 38,500 will pay more than before. Fewer than 10% of estates are forecast to have a liability.

Executors, families planning succession and pension schemes are all affected. Schemes will need processes to share valuations quickly, and executors will need to identify every pension the deceased held.

What happens next

Comments on the draft legislation are due by 15 September 2025, and regulations on information sharing will be consulted on separately. With inheritance tax on pensions starting on 6 April 2027, families and their advisers have time to review wills, pension nominations and wider estate plans before the rules apply.

Sources

• GOV.UK: Inheritance Tax on pensions, summary of responses
• GOV.UK: Inheritance Tax on pensions: liability, reporting and payment
• GOV.UK: Draft legislation, Inheritance Tax on pension interests