Do pensions pay inheritance tax? What changes in April 2027
From 6 April 2027, most pension money left unspent at death will count towards the estate for inheritance tax. Until then, most of it is left outside.
Tax year 2026/27 · Figures as at 31 October 2026
What the estate pays
Inheritance tax is charged at 40% on the part of an estate above £325,000, the nil-rate band.
A home left to children or grandchildren can add up to £175,000 more. That extra allowance tapers away for estates above £2,000,000.
Everything left to a husband, wife or civil partner is exempt, and so is anything left to a registered charity.
What will stay outside
Two kinds of pension payment will be left out of the estate altogether:
- A death-in-service benefit from a registered pension scheme.
- A dependant’s pension from a defined benefit scheme.
The personal representatives, who deal with the estate, will report and pay any inheritance tax due on the pension.
Income tax for whoever inherits
Pension money inherited from someone who died before 75 is usually free of income tax. From someone who died at 75 or over, it is taxed as the family’s own income.
How Landfall handles it
Inheritance tax is estimated once, on what the household leaves after the last year. It sits outside Tax over the plan, and Plan detail gives it under “What happens at the end”.
Where the figures come from
- Pensions join the estate, the law, read 14 September 2026
- Inheritance tax rate, the law, read 14 September 2026
- Inheritance tax threshold, the law, read 14 September 2026
- Home allowance for inheritance tax, the law, read 14 September 2026
- Age from which an inherited pension is taxed as the family’s income, the law, read 17 September 2026
Also read for this page
- Inheritance Tax on unused pension funds and death benefits (HMRC policy paper), read 30 September 2026
- Inheritance Tax (GOV.UK), read 30 September 2026
- Tax on a private pension you inherit (GOV.UK), read 30 September 2026
More in Tax on pensions and savings
- How much can you give away free of inheritance tax?How gifts leave an estate free of inheritance tax, what happens if the giver dies within seven years, and gifts to a child through a Junior ISA or a pension.
- Pension or ISA: what does each do with the same pound?What each wrapper does with the same pound: tax at opposite ends, what a pension adds, what an ISA keeps open, the yearly limits, and what is changing.
- How is pension income taxed in each UK nation?A pension is taxed at the income tax rates of the nation you live in. The 2026/27 bands for each, with the official source behind every figure.
