> Source: https://swiftwill.co.uk/inheritance-tax/pensions/ — SwiftWill, first published 24 September 2026, updated 24 September 2026. This Markdown mirror is generated at build time from the page's HTML. General information for England and Wales, not legal advice.

# Pensions and inheritance tax

By [SwiftWill](https://swiftwill.co.uk/about/) · Updated 24 September 2026 · England and Wales

Quick answer

For deaths before 6 April 2027, most unused pension pots and lump sum death benefits sit outside the estate for inheritance tax. For deaths on or after 6 April 2027, Finance Act 2026 brings most unused pension funds and death benefits into the estate, and the executors must report and pay any tax. Death-in-service benefits and dependants' scheme pensions are excluded, and benefits paid to a spouse, civil partner or charity are exempt.

## What is the position for deaths before 6 April 2027?

Most pension death benefits are outside the estate today. The majority of UK pension schemes are discretionary, meaning the scheme trustees decide who receives the benefits, and discretionary benefits are not part of the member’s estate. GOV.UK puts it simply: you do not usually pay inheritance tax on a lump sum because payment is usually discretionary ([GOV.UK: tax on a private pension you inherit](https://www.gov.uk/tax-on-pension-death-benefits)).

HMRC notes that some schemes, such as the NHS and judicial schemes, are non-discretionary and already count in the estate ([HMRC tax information and impact note, 26 November 2025](https://www.gov.uk/government/publications/inheritance-tax-unused-pension-funds-and-death-benefits/inheritance-tax-unused-pension-funds-and-death-benefits)). HMRC’s technical note confirms that if the member dies before 6 April 2027, the current rules apply even if benefits are paid after that date.

## What changes on 6 April 2027?

The change is law. Finance Act 2026 received Royal Assent on 18 March 2026. Section 66 inserts a new section 150A into the Inheritance Tax Act 1984, which treats a scheme member as owning “notional pension property” immediately before death, and section 71 applies the change to deaths on or after 6 April 2027 ([Finance Act 2026, section 66](https://www.legislation.gov.uk/ukpga/2026/11/section/66); [section 71](https://www.legislation.gov.uk/ukpga/2026/11/section/71)).

That notional property is added to the rest of the estate. It uses the nil-rate band alongside everything else, and any tax is shared across the whole estate. HMRC says it will provide an online tool to work out the share of nil-rate band attributable to pension property.

Pension death benefits and inheritance tax for deaths on or after 6 April 2027
| Benefit | Treatment |
| --- | --- |
| Unused defined contribution pot, including drawdown funds | Included in the estate. |
| Lump sum death benefit from a defined benefit scheme | Included in the estate. |
| Death-in-service benefit from current employment | Excluded. Benefits from a former employer’s scheme or a refund of contributions do not count as death in service. |
| Dependants’ scheme pension | Excluded, whatever type of scheme pays it. |
| Dependant’s or nominee’s annuity bought with the member’s own lifetime annuity | Excluded. |
| Benefits paid to a spouse or civil partner | Included in the value, then exempt under the spouse exemption. |
| Benefits paid to a charity | Included in the value, then exempt. |

The exclusions and the spouse and charity rules come from the Act and HMRC’s technical note ([Finance Act 2026, section 69](https://www.legislation.gov.uk/ukpga/2026/11/section/69); [HMRC technical note, updated 29 May 2026](https://www.gov.uk/government/publications/inheritance-tax-on-pensions-technical-note/technical-note-inheritance-tax-on-pensions)).

## What is still to be confirmed?

The tax charge itself is settled. The administration is not finished. HMRC says Finance Act 2026 will be supported by regulations on information sharing between personal representatives and pension schemes, with guidance, templates and interactive tools published for April 2027. A second technical note followed on 27 August 2026, and HMRC expects a third this autumn covering international issues, the interaction with income tax, intestacy, charities and trusts, with regulations on excepted estates to follow ([HMRC technical note 2](https://www.gov.uk/government/publications/inheritance-tax-on-pensions-technical-note-2/technical-note-2-further-information-on-inheritance-tax-and-pensions)). We will update this page when that guidance is published.

## Who pays the tax on pension benefits?

The personal representatives are responsible for reporting pension benefits and are liable for the tax. Once the scheme decides who will receive the benefits, that beneficiary becomes jointly liable with them. Scheme administrators are not normally liable ([Finance Act 2026, section 67](https://www.legislation.gov.uk/ukpga/2026/11/section/67)). The Act gives executors two tools ([section 68](https://www.legislation.gov.uk/ukpga/2026/11/section/68)):

-   **Withholding notice.** The executors, or someone about to become one, can tell the scheme to pay no more than 50% of each beneficiary’s benefits until the tax is settled, for up to 15 months after the end of the month of death.
-   **Payment notice.** The executors or a beneficiary can require the scheme to pay tax of £1,000 or more straight to HMRC from the benefits, within 35 days.

Tax is due by the end of the sixth month after the death, like the rest of the estate’s tax, with interest after that. If a pension comes to light after HMRC has confirmed the estate’s tax is settled, the executors are not liable for the tax on it unless they were careless in not disclosing it.

Unless your will says otherwise, the tax on pension benefits is not paid out of your residue. The law treats only tax on property that vests in the executors as an estate expense, and executors who do pay tax on pension benefits can recover it from the person who received them ([Inheritance Tax Act 1984, section 211](https://www.legislation.gov.uk/ukpga/1984/51/section/211)).

## How do income tax and inheritance tax interact?

Income tax on inherited pensions depends mainly on the member’s age at death. If they died under 75, most lump sums and drawdown income are tax-free for the beneficiary, subject to the member’s lump sum and death benefit allowance and a two-year time limit. If they died at 75 or over, the beneficiary pays income tax at their own rate ([GOV.UK: tax on a private pension you inherit](https://www.gov.uk/tax-on-pension-death-benefits)).

From April 2027 both taxes can apply to the same pot, but not to the same pounds. The part of the benefits that pays inheritance tax, including interest, is not counted as the beneficiary’s taxable income. As an illustration, if £40,000 of inheritance tax is paid from a £100,000 pot through a payment notice, the beneficiary pays income tax only on the £60,000 they receive ([HMRC technical note, section 8](https://www.gov.uk/government/publications/inheritance-tax-on-pensions-technical-note/technical-note-inheritance-tax-on-pensions)).

## How will this affect the rest of the estate?

-   **Less allowance for everything else.** A large pension now shares the £325,000 nil-rate band with the home and savings, so more of the estate can be taxed.
-   **The £2 million taper.** Because pension funds become part of the estate, they will also count towards the threshold at which the residence nil-rate band starts to taper. See [the residence nil-rate band explained](https://swiftwill.co.uk/inheritance-tax/residence-nil-rate-band/).
-   **More paperwork.** An estate that was previously below the reporting thresholds may need a full account once pension funds are added. Executors should ask every scheme for values early.
-   **Unmarried partners.** Pension benefits paid to an unmarried partner are not exempt, so a couple who rely on nominations instead of marriage may face a bill they did not have before. See [wills for unmarried couples](https://swiftwill.co.uk/will-for-unmarried-couples/).

## What is an expression of wish form, and does my will override it?

An expression of wish, sometimes called a nomination, tells the scheme trustees who you would like to receive your death benefits. For most schemes the trustees decide, after considering potential beneficiaries and your expression of wish. HMRC’s technical note confirms this remains how benefits are allocated after April 2027: the benefits are treated as passing to a beneficiary when the trustees make their decision.

A will does not normally control pension death benefits, and a will that says “my pension to my daughter” may have no effect. What to do instead:

1.  List every pension you have, including old workplace schemes.
2.  Ask each scheme how its death benefits work and whether its rules are discretionary.
3.  Complete or update each expression of wish so it matches the plan in your will.
4.  Review the forms after marriage, divorce, a new partner or a new child.
5.  Tell your executors where the pension details are kept, for example in the [executor handover template](https://swiftwill.co.uk/executor-handover/).

From April 2027 the choice of beneficiary also affects the tax. Benefits to a spouse or civil partner are exempt; benefits to children or a partner are not. Read [what a will does not cover](https://swiftwill.co.uk/what-a-will-does-not-cover/) for other assets that pass outside a will.

## When should you get advice?

Pension and inheritance tax planning needs individual advice from a regulated financial adviser or a tax adviser, especially if you have a large pension, are 75 or older, draw income from your pension to make regular gifts, or were planning to leave your pension untouched to pass on. Do not change how you draw or transfer a pension on the strength of a general guide.

SwiftWill’s automated will does not do tax planning and does not deal with pensions: nominations are made with each scheme. The will records who inherits the rest of your estate. For wider questions, start with our [inheritance tax guide](https://swiftwill.co.uk/inheritance-tax/) and [when to use a solicitor](https://swiftwill.co.uk/do-i-need-a-solicitor-for-a-will/).

## Sources

-   [Finance Act 2026, Part 2 (sections 66 to 71: pension interests)](https://www.legislation.gov.uk/ukpga/2026/11/contents)
-   [HMRC: technical note, inheritance tax on pensions (updated 29 May 2026)](https://www.gov.uk/government/publications/inheritance-tax-on-pensions-technical-note/technical-note-inheritance-tax-on-pensions)
-   [HMRC: technical note 2 (published 27 August 2026)](https://www.gov.uk/government/publications/inheritance-tax-on-pensions-technical-note-2/technical-note-2-further-information-on-inheritance-tax-and-pensions)
-   [HMRC: inheritance tax, unused pension funds and death benefits (26 November 2025)](https://www.gov.uk/government/publications/inheritance-tax-unused-pension-funds-and-death-benefits/inheritance-tax-unused-pension-funds-and-death-benefits)
-   [GOV.UK: tax on a private pension you inherit](https://www.gov.uk/tax-on-pension-death-benefits)
-   [Inheritance Tax Act 1984, section 211 (burden of tax)](https://www.legislation.gov.uk/ukpga/1984/51/section/211)

Sources checked 24 September 2026.

## Frequently asked questions

**Will my pension be subject to inheritance tax?**

If you die before 6 April 2027, most unused pension pots and lump sum death benefits are not part of your estate. If you die on or after 6 April 2027, most unused pension funds and death benefits are added to your estate, so tax is due if the total is above your allowances and the money does not go to an exempt beneficiary.

**Is the pension inheritance tax change law yet?**

Yes. Finance Act 2026 received Royal Assent on 18 March 2026, and sections 66 to 71 apply to deaths on or after 6 April 2027. Regulations on information sharing between executors and pension schemes, and HMRC's detailed guidance, are still being finalised for April 2027.

**Are death-in-service benefits subject to inheritance tax?**

No. Death-in-service benefits paid because the member was in employment or other work immediately before death are excluded. Benefits from a previous employer's scheme, or a refund of contributions that would have been paid anyway, are not death-in-service benefits.

**Is a pension left to my husband, wife or civil partner taxed?**

Pension death benefits that go to a spouse or civil partner are covered by the spouse exemption, as long as the usual conditions are met. A dependants' scheme pension is excluded altogether. An unmarried partner gets no exemption.

**Who pays inheritance tax on an inherited pension?**

From 6 April 2027 the personal representatives are responsible for reporting and paying it, and a beneficiary becomes jointly liable once the scheme decides they will receive the benefits. Executors can ask the scheme to hold back benefits and to pay the tax directly to HMRC.

**Does my will decide who gets my pension?**

Usually not. Most schemes pay death benefits at the trustees' discretion, taking account of your expression of wish or nomination form. Keep each scheme's form up to date and consistent with your will.

**Can an inherited pension be taxed twice?**

Both taxes can apply, but not to the same slice. If the member died aged 75 or over, benefits are taxed as the beneficiary's income, and from April 2027 inheritance tax may also be due. The part of the benefits used to pay inheritance tax is not treated as taxable income.

Published by SwiftWill. First published 24 September 2026; updated 24 September 2026. General information for England and Wales, not legal advice. Sources are linked in the guide; publication is not an individual legal review. Spotted an error? See our [corrections log](https://swiftwill.co.uk/corrections/).