From 6 April 2027, most unused pension funds and death benefits are added to your estate for Inheritance Tax. Compare the bill before and after the change.
Property, savings, investments and possessions, net of debts.
SIPPs, personal pensions and unused drawdown funds left at death.
Nil-rate band £ + £ residence band; on the excess. Death-in-service benefits and dependants' scheme pensions from defined benefit schemes stay outside the estate.
IHT under the 2027 rules
Transfers to a spouse or civil partner are IHT-free - nothing to pay more than before the pension was counted the pension does not change your bill at these figures No Inheritance Tax to pay, even with the pension included
IHT before 2027 rules
IHT from April 2027
extra tax
The £2m taper is eroding your residence band
Your combined estate is over £2 million, so the residence nil-rate band is cut by £1 for every £2 above it - the pension now counts toward that threshold. You keep of .
The double hit after age 75
Dying at or after 75 means beneficiaries also pay Income Tax at their marginal rate as they draw the inherited pot - on top of any IHT. Illustratively, of your pension: about IHT, then about Income Tax at on withdrawal - beneficiaries keep roughly ( of the pot).
Estimate only. Gifts, trusts, reliefs and drawdown strategy all change the outcome - take advice for planning.
Your estate of with the pension pot varying from £0 to . The old-rules line stays flat because the pension used to sit outside the estate.
| Scenario | IHT before | IHT from 2027 | Extra | |
|---|---|---|---|---|
Pension Inheritance Tax Calculator (2027) by TaxFly — free UK tax calculators