⚠️ This guide is for general information only and was researched and updated in May 2026. It is not legal or tax advice. Tax and succession laws change frequently and depend on your circumstances. For advice on your situation, please consult a qualified solicitor and tax adviser.
UK Pensions and Inheritance Tax
Most unused pension funds and pension death benefits are expected to count towards the value of an estate for United Kingdom inheritance tax. This guide explains the announced rules in plain language and what executors typically need to have organised
What is expected to change
Until now, most defined contribution pension pots and many death benefits have sat outside the estate for inheritance tax (IHT), because the scheme trustees usually decide who receives them. Under the rules the government has announced, most unused pension funds and death benefits are expected to be added to the value of the estate for deaths after the change takes effect.
The estate is then measured against the available allowances as usual: the nil-rate band and, where a home passes to direct descendants, the residence nil-rate band. Value above the available allowances is generally taxed at 40%. Estimate your own figures with the inheritance tax calculator, which can include a pension value.
The residence nil-rate band taper
The residence nil-rate band is reduced by £1 for every £2 by which the estate is worth more than £2,000,000. Because pension funds are expected to count towards the estate, an estate that sat below that level before may move above it, and the band available may fall as a result.
What stays outside
Under the announced rules, the following are expected to remain outside the estate:
- Death-in-service benefits paid from registered pension schemes.
- Dependants’ scheme pensions, such as a spouse’s pension from a defined benefit scheme.
- Charity lump sum death benefits.
- Pension funds already used to buy most joint-life or guaranteed-period annuities, which follow their own rules.
Spouses and civil partners
Assets passing to a spouse or civil partner are generally exempt from UK inheritance tax, and pension funds passing to them are expected to be treated the same way. Any unused nil-rate band may usually be transferred to the surviving partner’s estate. The position can differ where the surviving partner is not domiciled or long-term resident in the United Kingdom.
Deaths at age 75 or over
Where the pension holder dies aged 75 or over, beneficiaries typically pay income tax at their own rate on what they draw from the inherited pension. Under the announced rules, the same fund may also be within the estate for inheritance tax, so both taxes can be relevant to one pot. HMRC guidance sets out how the two interact.
What executors typically do
Under the announced rules, personal representatives (executors, or administrators where there is no will) are expected to be responsible for reporting pension values and paying any inheritance tax due on them. In practice that usually involves:
- Identifying every pension scheme the person belonged to, including older workplace schemes.
- Asking each scheme administrator for the value of unused funds and death benefits at the date of death.
- Including those values in the estate’s inheritance tax account.
- Arranging payment of any tax due, which may include asking a scheme to pay tax directly from the fund.
Timelines
Inheritance tax is generally due by the end of the sixth month after the month in which the person died, and HMRC normally charges interest after that date. Pension schemes can take time to confirm values, so contacting them early is usually helpful.
What information to have organised
Executors can only report what they can find. It usually helps to keep a clear record of:
- Each pension scheme’s name, provider and member or policy reference.
- Scheme contact details and where the latest statements are kept.
- Any expression of wish or nomination form, and when it was last reviewed.
- Life cover and whether each policy is written in trust.
The asset tracker lets you record your pensions alongside your other assets, and the inheritance tax calculator gives an indicative estimate that can include a pension value.
Questions you may wish to ask a regulated adviser
This guide is general information, not advice. If you would like to understand your own position, questions you may wish to raise with a regulated financial adviser or a qualified solicitor or tax adviser include:
- How are my pensions expected to be treated under the announced rules?
- Are my nomination or expression of wish forms up to date?
- How might the residence nil-rate band apply to my estate?
- What would my executors need to do, and what records would help them?
- How do income tax and inheritance tax interact for my beneficiaries?
Frequently asked questions
Will my pension count towards my estate for inheritance tax?
Under the announced rules, most unused pension funds and pension death benefits are expected to be included in the value of an estate for UK inheritance tax for deaths after the change takes effect. Whether tax is actually payable depends on the whole estate, the allowances available and who inherits.
Does this change affect pensions left to a spouse or civil partner?
Generally, assets passing to a spouse or civil partner are exempt from UK inheritance tax, and pension funds are expected to be treated the same way. The position can differ where the spouse or civil partner is not domiciled or long-term resident in the UK.
What happens if someone dies after age 75?
Beneficiaries typically pay income tax on what they draw from an inherited pension where the member died aged 75 or over. Under the announced rules, the same fund may also be within the estate for inheritance tax, so both taxes can be relevant. HMRC guidance sets out how the two interact.
Could pensions affect the residence nil-rate band?
The residence nil-rate band is gradually withdrawn for estates worth more than £2,000,000. Because pension funds are expected to count towards the estate value, an estate that was below that level may move above it.
Who is responsible for reporting and paying the tax on a pension?
The personal representatives, working with each pension scheme administrator. Beneficiaries and personal representatives may be able to ask a scheme to pay tax directly from the fund.
Is death-in-service cover included?
Death-in-service benefits paid from registered pension schemes are expected to stay outside the estate for inheritance tax. Check with the scheme or your employer how your own cover is arranged.
Sources
- GOV.UK: How Inheritance Tax works (opens in a new tab)
- GOV.UK: Inheritance Tax residence nil rate band (opens in a new tab)
Information as at May 2026. The rules described here were announced by the government and may change; see also our inheritance tax guide and UK inheritance tax and long-term residence.
Put a clear will in place
Pension nominations sit outside your will, but a valid, up-to-date will still decides who inherits everything else. Start yours with structured prompts, or find a professional for advice on your own position.
Discuss This in the Community
Have questions about this topic? Join the discussion in our community forum. Get answers from verified professionals and other members.