What is the April 2027 pension Inheritance Tax change?
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In short: From 6 April 2027 most unused defined contribution pension funds will be included in your estate for Inheritance Tax at 40% above the nil-rate bands — ending the long-standing IHT advantage of leaving pensions untouched.
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Reviewed by Kaiser Khan
Today, most DC pensions sit outside the estate. Death before 75 can pass tax-free to beneficiaries; death after 75 means beneficiaries pay Income Tax on withdrawals, not IHT on the pot itself.
From April 2027 the value of unused DC funds (and most lump-sum death benefits) is expected to form part of the estate for IHT. Spouse and civil partner transfers should still qualify for the spouse exemption; children and other beneficiaries may face IHT plus Income Tax on post-75 deaths.
Many retirees are revisiting drawdown speed, lifetime gifting and whole-of-life policies written in trust. See our full April 2027 pension IHT guide and Inheritance Tax calculator.
Primary source: gov.uk/government/consultations/inheritance-tax-on-pensions-liability-reporting-and-payment
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