Pension inheritance tax in the UK turns on the date of death: most unused pensions stay outside the estate before 6 April 2027 and fall inside it after.

Whether a pension counts for inheritance tax depends on when its owner dies, what kind of benefit it pays and who receives it. This page explains the rules either side of 6 April 2027 in general; it does not work out anyone's tax.

MoneyHelper's Pension Wise service, "free, impartial and backed by government", is open to anyone with a UK defined contribution pension who is 50 or over, or who is younger and has inherited someone else's pension. Where the pension is one piece of a larger estate, an FCA-authorised adviser can weigh the two together on a free call, arranged once the form on this page reaches us.

The short answer: it depends on the date of death

The change is law, not a proposal: the Finance Act 2026 became law with Royal Assent on 18 March 2026. Sections 66 to 70 make it, and section 71 applies them to "deaths, and (so far as relevant) to other transfers of value within the meaning of IHTA 1984, occurring on or after 6 April 2027."

  • Death before 6 April 2027: the existing rules apply, "even if pension benefits are paid to their beneficiaries after this date", HMRC's technical note says.
  • Death on or after 6 April 2027: most unused pension funds and pension death benefits are brought into the value of the estate. Some benefits are left out, and transfers to a spouse, civil partner or charity are exempt as they are for other assets.

The regulations setting out what schemes and personal representatives must tell each other (SI 2026/818) were made on 13 July 2026 and come into force on 6 April 2027. HMRC's second technical note, of 27 August 2026, says further regulations are expected and that it will "publish guidance and other supporting materials" in spring 2027, so some practical detail is still to come.

Deaths before 6 April 2027: why most unused pensions sit outside the estate

For these deaths the test is discretion. HMRC's Inheritance Tax Manual says that where the scheme decides who is paid, and the member could not have taken that choice away from it, the payment "is not treated as part of the estate whether or not any letter of wishes is followed". HMRC's policy paper adds that most UK schemes work this way and that unused funds in them "can currently be passed on to beneficiaries after death without any Inheritance Tax charge". A nomination form records wishes and is generally not binding (see how to fill in an expression of wish). GOV.UK's guide for beneficiaries, which still describes these rules, suggests asking the provider whether a lump sum was paid at its discretion, since inheritance tax may be due if not.

Some schemes are not discretionary. The policy paper names "the NHS and judicial schemes" as non-discretionary schemes "treated as part of an individual’s estate for Inheritance Tax purposes".

Deaths on or after 6 April 2027: what counts and what is left out

The Act treats a scheme member as entitled, immediately before death, to "notional pension property", and no other pension interest counts in valuing the estate. Whether the scheme had discretion no longer decides the matter. What counts depends on the pension:

  • Defined contribution pots, including SIPPs. The value of whatever in the member's pot may or must be used to provide benefits on death, less anything that can only be paid as an excluded benefit. Money left in drawdown counts: in one of HMRC's worked examples the scheme reports notional pension property of "£50K, being the value of the flexi-access drawdown account at the date of death".
  • Defined benefit (final salary) schemes. Only some death benefits: a lump sum that must be paid, one that may be and can reasonably be expected to be paid, and payments that continue under a guarantee, a step HMRC's first note says "brings into scope pension or annuity payments made under guarantee provisions".
  • Overseas schemes. Qualifying non-UK schemes are covered too; see overseas pensions and QROPS.

The scheme works out which category applies. Investments held in a pension can fall as well as rise in value, and the Act values the pension immediately before death.

An excluded benefit is never counted; an exempt transfer is counted but not taxed because of who receives it. The Act's excluded benefits are those that "may only be paid under the scheme" as:

  • A dependants' scheme pension. HMRC's note says it "will be an excluded benefit, regardless of the type of pension arrangement from which it is paid". The scheme's rules decide who qualifies and for how long.
  • A trivial commutation lump sum death benefit, only where paying it ends the person's entitlement to a dependants' scheme pension.
  • A dependants' or nominees' annuity, only where it was purchased together with a lifetime annuity payable to the member. HMRC adds that there is "no requirement for the other party to be a dependant of the deceased member".
  • Death in service benefits, meaning an amount payable because the member was in "employment or other work of a particular description immediately before their death", and that would not be paid otherwise.

The death in service exclusion is narrower than the name suggests. HMRC says that "payments from pension schemes related to previous jobs that the deceased was a deferred member of, do not meet the conditions for this exclusion". See what happens to a workplace pension when you die.

For exemptions, section 69 extends the spouse and civil partner exemption to pension benefits a surviving spouse or civil partner receives, or has a present or future right to receive, other than as an excluded benefit, and does the same for benefits given to charities. HMRC's technical note describes the spouse exemption as applying "where they are long-term UK residents". The scheme gives the personal representatives the pension's value, "including any benefits going to exempt beneficiaries", and the personal representatives "claim the appropriate exemption, so that Inheritance Tax is not charged on the value of those benefits".

From April 2027: the threshold, and who reports and pays

The pension's value is added to the rest of the estate and the usual rules apply. GOV.UK's inheritance tax guide, read on 18 October 2026, says there is normally nothing to pay if "the value of your estate is below the £325,000 threshold", and that the standard rate of 40% is "only charged on the part of your estate that’s above the threshold"; "your threshold can increase to £500,000" when a home goes to children or grandchildren, on conditions the guide sets out. HMRC's policy paper expects that "most estates will continue to have no Inheritance Tax liability after 6 April 2027".

The main duty falls on the personal representatives, the people dealing with the estate. HMRC's note says they "will be responsible for reporting and liable for paying any Inheritance Tax due on notional pension property". In Scotland the note refers to Confirmation alongside a Grant of Probate and Letters of Administration. Tax is due "as normal at the end of the sixth month after the date of death", after which late payment interest builds up.

  • Beneficiaries. Once a benefit is vested in a beneficiary, which in a discretionary scheme is when the trustees decide, they become "jointly and severally liable, with the personal representatives, for any Inheritance Tax attributable to that property".
  • Schemes. "In normal circumstances, neither pension scheme administrators nor trustees of registered pension schemes will be liable for any Inheritance Tax." An administrator becomes liable if it fails to action a valid withholding or payment notice.

Two mechanisms in the Act let the tax be met from the pension. A withholding notice, which personal representatives or a prospective personal representative can give, stops payments to a person that would take what they have received above 50% of their benefit entitlement, and ends at the latest "15 months after the end of the month in which the deceased died". A payment notice lets a person liable for the tax require the scheme administrator to pay it; the administrator must pay within 35 days of receiving it, and the amount asked for must be "not less than £1,000". HMRC says schemes will have to respond to notices before the grant is issued.

How these notices fit with a will and a scheme's rules is hard to judge from outside. Executors, and people planning their own estate, can ask an adviser authorised by the FCA to talk through the pension side, starting from the form on this page; the will and the estate itself are work for a solicitor. For the practical steps after a death, see what happens to a pension when someone dies.

Income tax on an inherited pension, and being taxed twice

Inheritance tax is charged on the estate; income tax is charged on what each beneficiary receives, and it follows the age of the person who died. In GOV.UK's table for a private pension you inherit, most lump sums, annuities and new drawdown funds carry "No tax" when the owner died under 75 (for a lump sum, within the owner's lump sum and death benefit allowance and if paid within 2 years of the provider being told of the death), while at 75 or over the provider deducts Income Tax. A pension paid by the scheme itself is taxed at any age, and dependants' scheme pensions, HMRC's note says, "are always taxed at the recipient’s marginal rate but are an excluded benefit for Inheritance Tax purposes". The full rules, including older drawdown funds, are in how inherited pensions are taxed; a member's own tax-free cash while alive is a different question, covered in the tax-free lump sum guide.

So for a death on or after 6 April 2027, a pension left by someone aged 75 or over can fall within the estate and then be taxable as income to the person who receives it. HMRC's note says that where inheritance tax is paid on death benefits, "the portion of the benefits corresponding to the Inheritance Tax (and interest) paid does not count towards the beneficiary’s taxable income". Where a payment notice is used, income tax is charged on the benefit "net of Inheritance Tax"; a beneficiary who withdraws the full amount and bears the inheritance tax "will need to work with HMRC to resolve their Income Tax position", with further guidance to follow.

Pensions and inheritance tax: questions people ask

Is a pension left to a spouse subject to inheritance tax?

For a death on or after 6 April 2027 its value goes on the estate's account, and the personal representatives claim the spouse or civil partner exemption so that no inheritance tax is charged on it; HMRC's note describes that exemption as applying to long-term UK residents. Income tax is separate.

Is a pension in drawdown subject to inheritance tax if the holder dies?

Before 6 April 2027, money left in drawdown in a discretionary scheme is generally outside the estate. For a later death it counts at its value at the date of death, as in HMRC's example above. What a beneficiary can then do with it is covered in beneficiary drawdown.

Is an annuity subject to inheritance tax?

It depends on what the annuity pays after death. One that simply stops adds nothing: in another HMRC example the provider confirms "the value of the notional pension property is £0". A dependants' or nominees' annuity bought together with the member's own is an excluded benefit, while payments that continue under a guarantee, where a member dies "within the first 10 years of becoming entitled to a pension or annuity", are brought into scope. See what happens to an annuity when you die.

Are final salary and NHS pensions subject to inheritance tax?

Under the current rules HMRC's policy paper names the NHS scheme among the non-discretionary schemes already treated as part of the estate. For deaths from 6 April 2027 the defined benefit rules above apply to every such scheme: lump sums count, while a dependants' scheme pension and qualifying death in service benefits do not. How a particular scheme classes each of its benefits is a question for that scheme.

Does inheritance tax apply to the State Pension, or to contributions?

The State Pension has its own rules in the State Pension and inheritance tax guide, and paying into a pension is covered in pension contributions and inheritance tax. Steps people consider are in how to avoid SIPP inheritance tax.

Your next step

Whether inheritance tax touches a pension turns on the date of death, the kind of benefit, who receives it and the size of the rest of the estate. Pension Wise and GOV.UK's inheritance tax guide are free places to start. If you would rather talk the pension side through with someone, an FCA-authorised adviser will ring once the form on this page is sent; the will and the estate itself are matters for a solicitor.

Sources, accessed 18 October 2026: legislation.gov.uk, Finance Act 2026 sections 66, 67, 68, 69, 70 and 71, and SI 2026/818; HMRC, Inheritance Tax: unused pension funds and death benefits (policy paper, 26 November 2025), Technical note: Inheritance Tax on pensions (updated 29 May 2026), Technical note 2 (27 August 2026) and Inheritance Tax Manual IHTM17052; GOV.UK, Tax on a private pension you inherit and How Inheritance Tax works; MoneyHelper, Pension Wise.