Britain’s tax authority, HMRC, has clarified how unused pension pots will be treated once they are brought within the scope of inheritance tax (IHT) from April 2027 — confirming that pension assets will not qualify for the same reliefs available to other parts of an estate. With fewer than eight months until the change takes effect, financial planners are urging families to review their estate plans now.
Nick Henshaw, Head of Intermediaries Distribution at Wesleyan, said the clarified rules add a distinct risk: pension pots discovered only after an estate has already been settled. In that scenario, he said, “the inheritance tax position across the estate may need to be revisited, potentially leaving beneficiaries facing an unexpected bill years after an inheritance has been distributed.” The change compounds a broader trend — frozen thresholds and rising property and asset values are already pulling more estates into the inheritance-tax net, often without families realising it. HMRC’s latest tax receipts show IHT revenue reached £3.2 billion for April to July, up £0.1 billion on the same period last year.
Shaun Moore, a tax and financial planning expert at Quilter, pointed to a similar pattern in income tax: PAYE income tax and National Insurance contributions for the same four months came in at £173.2 billion, £12.5 billion more than a year earlier, which he attributed largely to the continued freeze on income tax thresholds pulling more earners into higher tax bands. Both Moore and Henshaw advised families to focus on what has already been confirmed — keeping an up-to-date record of pension arrangements and reviewing estate plans — rather than speculate about further changes ahead of the government’s upcoming budget.
