Pensions and inheritance tax — what executors must do from April 2027.

Which pensions count

From 6 April 2027, HMRC calls the pension amounts that count “notional pension property”: the value of unused funds and death benefits under the deceased’s registered pension schemes at the date of death.

Some benefits stay outside inheritance tax:

• Death-in-service benefits from registered pension schemes.
• Dependants’ scheme pensions from defined benefit (final salary) and collective money purchase arrangements.
• Dependants’ or nominees’ annuities bought with a lifetime annuity, and certain trivial commutations.
• Anything passing to a surviving spouse, civil partner or charity, which is exempt as now.

The executor’s steps

1. Tell each pension scheme about the death. Send the death certificate and evidence that you are the personal representative.
2. Ask each scheme for the basic information. The scheme must reply within 28 days with the value of the pension and whether it is going to exempt beneficiaries such as a spouse or charity.
3. Work out whether an inheritance tax account is needed. Add the pensions to the rest of the estate. Estates with pensions may not qualify as “excepted” (no full account needed) until HMRC updates those rules, so check the current position on GOV.UK.
4. If an account is needed, ask for the detailed information. Schemes then have 28 days, or 14 days after deciding who the beneficiaries are, to give the value going to each beneficiary and details of any excluded benefits.
5. Consider a withholding notice. If tax may be due, you can tell a scheme to hold back up to 50% of each non-exempt beneficiary’s payment. It lasts until the tax is paid, you withdraw it, or 15 months after the end of the month of death, whichever comes first.
6. Pay the tax. Inheritance tax is due six months after the end of the month of death, with interest after that. The pension’s share can be paid by the scheme through the Pensions Direct Payment Scheme: you or a beneficiary send a payment notice, the tax must be at least £1,000, and the scheme has 35 days to pay HMRC. The 28 October 2026 Budget announced that a prospective personal representative (someone who intends to apply to deal with the estate) will also be able to direct a scheme to pay the tax when certain conditions are met, subject to legislation in Finance Bill 2026-27.
7. Apply for clearance. At least 12 months after the death and 3 months after the grant of probate, you can apply on form IHT30. Clearance discharges you from liability for pensions you did not know about; tax on any pension found later falls on its beneficiaries.

How the tax is split between the estate and the pensions

Inheritance tax is worked out on the whole estate, including pensions, then shared between its parts in proportion to their chargeable value. HMRC says it will provide an online tool for the calculation.

For example, a single person leaves a £400,000 home to their children, £200,000 of other assets and a £300,000 pension. The estate of £900,000 has £500,000 of allowances, so £400,000 is taxed at 40%: £160,000. The pension is a third of the estate, so about £53,333 of the tax is attributable to it. Try your own figures in the inheritance tax calculator.

What beneficiaries should know

Beneficiaries who receive pension money are jointly liable with the executors for the inheritance tax attributable to it, which is why schemes can hold back part of a payment. If the person died at 75 or older, beneficiaries may also pay income tax on what they draw from the pension. See pension death benefits before and after 75.