The April 2027 pension change
What will the 2027 pension change cost your estate?
From 6 April 2027, unused pension funds count as part of your estate for inheritance tax. For a single homeowner with a £400,000 home, £150,000 of other assets and a £300,000 pension pot, the IHT bill rises from £20,000 under today's rules to £140,000, an extra £120,000. See both figures for your own estate.
How this is worked out
- From 6 April 2027, most unused pension funds and death benefits are included in the estate for IHT, announced at Autumn Budget 2024, with draft legislation published in July 2025 (gov.uk: IHT on pensions). The "current rules" figure excludes the pension; the "2027 rules" figure includes it.
- Nil rate band £325,000, frozen until April 2030; residence nil rate band £175,000 where the home passes to direct descendants, capped at the home's value and tapered £1 for every £2 the estate exceeds £2 million (gov.uk: inheritance tax). We apply the taper against the estate including the pension in the 2027 calculation.
- The "widowed / second death" toggle doubles both bands, assuming a predeceasing spouse used none of theirs, the common case where everything passed to the survivor exempt (gov.uk: transferring the threshold). Assets left to a spouse or civil partner remain wholly exempt in both regimes.
- The charity toggle applies the reduced 36% rate, which requires leaving at least 10% of the baseline net estate to charity; the calculator does not also deduct the gift itself, a full grossing calculation needs the components of your will (gov.uk).
- Not modelled: lifetime gifts within 7 years, trusts, business and agricultural reliefs, and any income tax your beneficiaries pay on inherited pension withdrawals where death occurs at or after age 75, that is on top of IHT and can push the combined effective rate far higher (see our 2027 guide).
IHT 2027 Calculator is an independent information site operated by Ellul Solutions Ltd. It is not affiliated with HMRC or any government body, and nothing here is tax, financial, legal or estate-planning advice. The April 2027 rules described follow announced policy and draft legislation and may change before commencement, confirm your position with a regulated adviser before acting.
IHT before vs after the April 2027 pension change
Last updated
Four estates computed with the calculator's exact formulas: 40% on the estate above the nil rate bands, home passing to direct descendants, full transferred allowances on second death for couples, no charity relief.
IHT = 40% × max(0, estate − £325,000 NRB − RNRB), with NRB and the £175,000 RNRB doubled for couples (second death, full transfer), RNRB capped at the home's value and tapered £1 per £2 over £2m. "Now" excludes the pension; "from Apr 2027" includes it, with the taper tested against the pension-inclusive estate.
| Scenario | Estate (excl. pension) | Pension pot | IHT now | IHT from Apr 2027 | Increase |
|---|---|---|---|---|---|
| Single: £400k home + £150k savings | £550,000 | £300,000 | £20,000 | £140,000 | +£120,000 |
| Single: £300k home + £100k savings | £400,000 | £250,000 | £0 | £60,000 | +£60,000 |
| Couple (2nd death): £600k home + £400k savings | £1,000,000 | £500,000 | £0 | £200,000 | +£200,000 |
| Couple (2nd death): £800k home + £700k savings | £1,500,000 | £800,000 | £200,000 | £580,000 | +£380,000 |
- A single homeowner with £550,000 of ordinary assets and a £300,000 pension pays £20,000 IHT under today's rules, and £140,000 for deaths from 6 April 2027.
- A couple sitting exactly at today's £1 million second-death threshold pays nothing now; add a £500,000 unused pension and the bill from April 2027 is £200,000.
- Larger estates are hit twice: a £2.3 million pension-inclusive estate loses £150,000 of residence nil rate band to the £2m taper as well as paying 40% on the pension itself.
Cite this page
“IHT before vs after the April 2027 pension change”, IHT 2027 Calculator, https://iht2027calculator.co.uk/ (updated 2026-08-14). IHT = 40% × max(0, estate − £325,000 NRB − RNRB), with NRB and the £175,000 RNRB doubled for couples (second death, full transfer), RNRB capped at the home's value and tapered £1 per £2 over £2m. "Now" excludes the pension; "from Apr 2027" includes it, with the taper tested against the pension-inclusive estate.
Concerned about the 2027 pension change?
An estate planning professional can tell you what the pension inclusion means for your family and what to do before April 2027.
This site provides information, not advice; the introduction is to a professional who can advise you. We may receive a fee from providers; you pay nothing.
Guides
The longer answers, with sources.
- Pensions and inheritance tax from April 2027: what changes
Deaths from 6 April 2027 bring unused pension funds and death benefits into the estate for IHT. What counts, who pays, and the double tax after 75, up to 67% combined.
- Residence nil rate band: the £175,000 home allowance and its £2m taper
RNRB: up to £175,000 per person (£350,000 for couples) when a home goes to direct descendants, tapering £1 per £2 over £2m; pensions get estates there sooner from 2027.
- Inheritance tax when the second parent dies: the £1 million question
On the second death a couple's estate can shelter up to £1 million: £650,000 of transferred nil rate bands plus £350,000 of residence bands. What the 2027 change does.
The questions we get
Will pensions be subject to inheritance tax from 2027?
Yes. For deaths on or after 6 April 2027, unused pension funds and most death benefits count as part of the estate for IHT, under the change announced at Autumn Budget 2024. Pensions passing to a spouse or civil partner remain exempt.
How much inheritance tax will I pay on my pension?
From April 2027, whatever 40% (or 36% with charity relief) applies to once the pension is added to your estate above the nil rate bands. A £300,000 pension on top of a £550,000 estate adds £120,000 of IHT for a single homeowner. If you die at or after 75, beneficiaries also pay income tax on withdrawals.
What is the inheritance tax threshold in 2026/27?
£325,000 per person, frozen until April 2030, plus up to £175,000 of residence nil rate band when a home passes to children or grandchildren, £500,000 for a single person, up to £1 million for a widowed person with full transferred allowances.
Does the 2027 change affect my spouse inheriting my pension?
No. Anything passing to a spouse or civil partner, including pensions, stays exempt from IHT. The charge typically arises on the second death, when the combined estate and any unused pension pass to the next generation.
Is the 36% charity rate worth it?
If you leave at least 10% of your baseline net estate to charity, the IHT rate on the rest drops from 40% to 36%. The gift itself is also tax-free, so the net cost to your other beneficiaries is far less than the amount given, sometimes close to nothing.
Is the April 2027 pension rule definitely happening?
It was announced at Autumn Budget 2024 and confirmed in July 2025 with draft legislation making personal representatives liable, taking effect for deaths on or after 6 April 2027. Final details can still change with the legislation, check gov.uk before acting.
See both bills before 2027 arrives.
Your estate under today's rules and the 2027 rules, side by side, in ten seconds.
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