When do pension pots become subject to IHT?

From April 2027, unused defined contribution pension pots will be included in the deceased's estate for Inheritance Tax purposes. Before this date, pension pots sit outside the estate and are not subject to IHT. This is one of the most significant changes to pension planning in decades.

Does this apply to all pension types?

The change primarily affects defined contribution (DC) pensions, including personal pensions, SIPPs, and most workplace pensions. Defined benefit (final salary) pensions generally do not leave a residual pot in the same way. Annuities already in payment are not affected. The government has confirmed DC pots remaining at death will be included in the estate from April 2027.

What if I leave my pension to my spouse?

Transfers between spouses and civil partners are fully exempt from Inheritance Tax, regardless of the asset. If you leave your pension to a spouse or civil partner, no IHT is due on the pension pot. However, when your surviving spouse later dies, their estate will include any pension pot they have not spent, along with whatever NRB they have available at that point.

Will my pension provider pay the IHT or will my estate?

Under the proposed rules, the pension scheme administrator will be responsible for paying any IHT attributable to the pension, before paying out death benefits to beneficiaries. This means beneficiaries receive the pension less the IHT due, rather than the estate having to fund the tax separately.

What can I do to reduce the IHT impact?

Several strategies may help: drawing down pension income faster to spend or give away before death; gifting assets now using the seven-year rule; using pension funds to pay off a mortgage, reducing estate value; leaving the pension to a charity or putting it into trust; reviewing whether your pension nomination forms are up to date. Speak to a financial adviser before making significant changes.

Does this affect the pension annual allowance or income tax?

No, the pension annual allowance (currently £60,000) is unchanged. The change is purely about IHT on death, not about contributions or drawdown. Income tax on pension withdrawals in retirement also continues unchanged.

Retirement & Tax Planning

Pension Inheritance Tax Calculator

From April 2027, unused pension pots will form part of your estate for Inheritance Tax. Calculate how much extra IHT your beneficiaries could face.

Updated April 2026

Proposed change: April 2027

From April 2027, unused defined contribution pension pots will be included in your estate for Inheritance Tax purposes. This calculator models the impact of that change. The rules are confirmed but some implementation details may be finalised before the start date.

Your details

Estate value (excluding pension)

Property, savings, investments and other assets minus debts

Unused pension pot

DC pension, SIPP or personal pension remaining at death

Main residence value

Set to 0 if renting or residence not left to direct descendants

Residence passing to children or direct descendants (RNRB applies)Transferring unused NRB from deceased spouse (doubles NRB to £650,000)Transferring unused RNRB from deceased spouse (doubles RNRB to £350,000)Pension left to spouse or civil partner (spouse exemption applies)

% of estate left to charity

10% or more reduces the IHT rate to 36%

Your results

£800,000 Estate, IHT from April 2027

Total IHT due (from April 2027)

£120,000

Total estate: £800,000
Effective rate: 15.0%
Total IHT due: £120,000

Breakdown

Estate and allowances

Estate (excl. pension): £500,000
Pension pot (taxable from Apr 2027): £300,000
Total estate: £800,000
Nil-rate band: -£325,000
Residence nil-rate band: -£175,000
Taxable estate: £300,000
IHT at 40%: £120,000

Pension IHT impact from April 2027

IHT without pension

£0

Extra IHT from pension

+£120,000

What changes in April 2027

Currently, defined contribution pension pots sit outside your estate for Inheritance Tax purposes. If you die before drawing your pension, your beneficiaries receive the full pot free of IHT. This has made pensions one of the most tax-efficient ways to pass wealth to the next generation.

From April 2027, unused pension pots will be brought into the estate and subject to the standard 40% IHT rate above your combined nil-rate bands. For many people with large pension pots, this represents a substantial new tax liability.

How the NRB and RNRB interact with your pension

Your nil-rate band (£325,000) and residence nil-rate band (up to £175,000 if you leave your home to direct descendants) are applied against the total estate including the pension. If your non-pension estate already exceeds the thresholds, the pension pot is effectively taxed at 40% in full.

The RNRB tapers away for estates above £2 million. If your total estate including the pension pot pushes you over this threshold, you may lose some or all of the RNRB.

Planning considerations before April 2027

There is still time to act before the rules change. Options worth discussing with a financial adviser include: drawing down pension income now and spending or gifting it; using pension funds to pay off debts that would otherwise sit in your estate; reviewing whether your pension nominations still make sense given the new tax treatment; and considering whether gifts made now could reduce the estate within the seven-year gifting rules.

The spouse exemption still applies fully. Leaving your pension to a spouse or civil partner is IHT-free, though their estate will then include it when they die.

Related calculators

Inheritance Tax Calculator Pension Calculator Salary Sacrifice Calculator Income Tax Calculator

Frequently asked questions

Sources & methodology

Built and maintained by Tim, a personal finance enthusiast (not a financial adviser). Last reviewed April 2026. Rates and thresholds come from official UK government publications.

HMRC: Income Tax rates and allowances · Official rates, bands and thresholds
GOV.UK: National Insurance rates · Employee and employer NI rates
Scottish Government: Income Tax · Scottish income tax rates and bands
The Pensions Regulator: Auto-enrolment · Qualifying earnings and contribution thresholds
GOV.UK: Tax on your private pension · Tax relief rules and annual allowances
HMRC: Pension schemes · Salary sacrifice and pension scheme types

Figures are estimates only. This is not financial or tax advice. For help with your specific situation, speak to HMRC or a qualified adviser.