Unspent pensions to count towards inheritance tax from April 2027
UKPulse Money Desk
From April 2027, unspent pensions will be included in estate valuations for inheritance tax (IHT) purposes. This change is projected to increase the number of estates liable for IHT.
- Unspent pensions will be included in estate valuations for inheritance tax from April 2027.
- The government's stated objective for this change is to prevent pensions from being used as a tax planning vehicle for wealth transfer.
- HMRC currently states that IHT is payable on fewer than 1 in 20 estates, but this is projected to rise to around 10% by the end of the decade due to the new rules.
From April 2027, unspent pensions will be included in the value of an individual's estate for inheritance tax (IHT) purposes. This policy shift aims to prevent pensions from being used as a means to transfer wealth between generations.
Currently, IHT applies to fewer than 1 in 20 estates, approximately 5% of UK deaths annually. However, with the new rules, this figure is expected to rise to about 10% by the end of the decade.
It is projected that around 10,500 estates will become newly liable for IHT in 2027-28, with a further 38,500 paying more IHT than before. While the change will impact a minority, those with larger estates may find this a significant planning consideration.
Why this matters: The inclusion of unspent pensions in inheritance tax calculations marks a significant change in how estates are valued, potentially increasing the number of people affected by IHT.
What this means for you: If you have an unspent pension, its value will be included when calculating your estate for inheritance tax from April 2027.