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Everything you need to know about the changes to inheritance tax from April 2027
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The age you can start accessing your pension savings is changing from 55 to 57 on 6 April 2028, and here’s how it could affect you.
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Changes to inheritance tax
Everything you need to know about the changes to inheritance tax from April 2027

What is inheritance tax?

Inheritance tax is a tax paid on the estate of someone who has passed away. The tax rate is 40% and is charged on the portion of the estate value that exceeds the available nil rate band.

The standard nil rate band is £325,000 per person, but could rise to £500,000 if the main home is given to children or grandchildren. Married couples and civil partners can combine their allowances (up to £1 million) and pass assets to each other freely on the first death in a married couple or civil partnership.

Changes coming in from 6 April 2027

From 6 April 2027, unused pension funds and death benefits will be included within the value of a deceased member's estate. This will involve:

  • Personal representatives becoming responsible for reporting and paying any inheritance tax due on pension death benefits to HMRC.
  • Pension schemes being required to support personal representatives by providing guidance on the potential tax consequences and payment process.
  • Spouses, civil partners, and registered charities remaining exempt from inheritance tax on these funds.
  • Personal representatives being able to direct pension schemes to withhold up to 50% of pension benefits for up to 15 months following the end of the month in which the member died.
  • Personal representatives and beneficiaries having the option to ask pension schemes to pay inheritance tax directly to HMRC.

Who can be accepted as a personal representative?

  • Legal personal representative: has full legal authority to administer a deceased person's estate as an executor (named in a valid will) or through the courts.
  • Prospective personal representative: someone who expects or has reason to believe they will deal with the deceased members estate, for example, next of kin.

Information sharing

Personal representatives will need to:

  • Notify pension schemes, request pension value(s) and beneficiary details
  • Provide evidence they are the personal representative for the deceased member
  • Provide supporting documents to the pension scheme and, where applicable, HMRC tax reference details

Smart Pension will be expected to:

  • Confirm the pension death benefit value at the date of death within 28 days of being notified by the personal representative.
  • Provide beneficiary details within 28 days of receiving a request, or within 14 days of beneficiaries being confirmed, including:
    • Details of potential or actual beneficiaries.
    • A clear breakdown distinguishing between exempt and non-exempt beneficiaries.

With the pension information provided (by the pension scheme), personal representatives will need to:

  • Value the overall estate (including the value of pension death benefits).
  • Determine if inheritance tax (IHT) is owed.
  • Open an IHT account with HMRC to formally submit the estate reporting.
  • Settle any IHT liability within six months following the end of the month of death.

How can inheritance tax be paid?

From the free estate:

  • Personal representatives can pay the tax due on the whole estate using funds available from non-pension assets before applying for probate.
  • Personal representatives have a legal right to recover the proportion of inheritance tax due on pension assets from the beneficiaries.

When a personal representative or pension beneficiary asks Smart Pension to pay:

  • Either party can submit a Pensions Direct Payment Scheme notice to Smart Pension.
  • The notice directs Smart Pension to pay the inheritance tax due on the pension death benefit directly to HMRC from the fund.
  • The payment requested must be for at least £1,000.

Where pension beneficiaries pay their share of inheritance tax directly to HMRC:

  • Beneficiaries can elect to receive the pension death benefits in full.
  • They then pay their share of the inheritance tax due directly to HMRC.

When is any inheritance tax due?

Personal representatives must pay any inheritance tax due to HMRC within six months from the end of the month after the date of death, so as to avoid late-payment interest and penalties being charged by HMRC.

What can you do now to make life easier?

Completing an expression of wish tells us how you would like your pension funds to be distributed once you have died. This will also help speed up the process by enabling us to share information with your personal representatives and next of kin quicker.

Log into your Smart Pension Account to nominate beneficiaries. Please check and ensure that your nomination percentages total 100%.

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Smart Pension can only provide guidance and is not regulated to give financial advice. If you require professional advice, you can find support on the MoneyHelper website.

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Last updated:
November 12, 2026

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