uktax.tools

Pension IHT 2027 Planner

Model how the 6 April 2027 pension-into-IHT change affects your estate under drawdown, gifting, annuity, and spend-down strategies.

Pension IHT 2027 Planner

DC defined-contribution unused funds expected at death.

Savings, ISAs, investments (not main residence, not pension).

Leave the pension untouched. Full pot enters estate from 6 April 2027.

Doing nothing costs your heirs £200,000 more after 6 April 2027.

Before 6 April 2027

Pension outside estate

Gross estate
£1,200,000
NRB
-£325,000
RNRB
-£175,000
Taxable estate
£700,000
IHT due
£280,000
Net to beneficiary
£920,000
From 6 April 2027

Pension inside estate

Gross estate
£1,700,000
NRB
-£325,000
RNRB
-£175,000
Taxable estate
£1,200,000
IHT due
£480,000
Net to beneficiary
£1,220,000
Share

Scope: Models unused DC pension funds and discretionary pension death benefits under the 6 April 2027 reform, originally announced at Autumn Budget 2024 and now legislated in Finance Act 2026 (Royal Assent 18 March 2026). DB scheme lump-sum death benefits paid at administrator discretion, dependant's scheme pensions/annuities without a guaranteed period, death-in-service benefits, and spouse and charity beneficiaries all remain outside the new rule. NRB £325k / RNRB £175k (tapered above £2M) — both transferable between spouses.

Not advice: Pension-into-IHT planning is specific to scheme rules, beneficiary circumstances, and lifetime gift history. Confirm with a chartered tax adviser or STEP-qualified solicitor before acting.

Frequently asked questions

What changes for pensions and IHT on 6 April 2027?
From 6 April 2027, most unused DC pension funds and discretionary pension death benefits will count as part of the deceased's estate for Inheritance Tax. Personal representatives (not scheme administrators) are liable. The existing £325,000 nil-rate band and £175,000 residence nil-rate band still apply, tapered above £2,000,000, and the 40% standard rate (or 36% for estates that leave ≥10% to charity) applies above them.
Which pensions are in scope?
Unused defined-contribution (DC) pension funds and discretionary pension death benefits. Out of scope: dependant's scheme pensions (from a defined benefit or collective money purchase arrangement), dependant's annuities without a guaranteed period (annuity income, not capital), death-in-service benefits from registered pension schemes, charity nominations, and spouse/civil partner beneficiary transfers (full spousal exemption).
Does the spouse exemption still apply after 6 April 2027?
Yes. Pension funds left to a spouse or civil partner continue to pass free of IHT, regardless of the pension-in-estate rule. The survivor inherits the full pot; any IHT charge is deferred to the second death (and even then may be offset by the transferable nil-rate band and residence nil-rate band).
Does the 7-year gift rule apply to pension withdrawals?
Yes — but only after you withdraw from the pension. Money inside a pension cannot be gifted. Once you draw down and pay income tax on the withdrawal, the money becomes a potentially exempt transfer (PET) when gifted; it falls fully outside the estate if you survive 7 years. Gifts made 3–7 years before death attract taper relief on the IHT charge above the nil-rate band.
Should I draw down now to beat the 2027 deadline?
It depends. Drawing down crystallises the pot and triggers income tax at your marginal rate (often 40% or 45%), potentially triggers the £10,000 Money Purchase Annual Allowance cap on future contributions, and if the proceeds sit in your estate they are still subject to IHT. A combined drawdown + gifting strategy (and surviving 7 years) is the clearest route to removing value from your eventual estate, but the income tax cost and gift-timing risk must be weighed. This planner models the trade-off.

Sources

Related Calculators

Inheritance Tax Rates Reference

Nil-rate band, residence nil-rate band and its taper, the 7-year gift taper table, and the gift exemptions.

Inheritance Tax Calculator

IHT with nil-rate band, RNRB, and spouse exemption.

BPR & APR Calculator

£2.5M combined allowance effective 6 April 2026, with 50% relief above and AIM at 50%.

Learn More

Pension IHT from 6 April 2027 — What to Do With Your 12-Month Runway

From 6 April 2027, unused DC pensions count toward your estate for Inheritance Tax. Four persona-based strategies for the 12-month planning window: drawdown, gifting, annuitisation, and estate structuring.

UK Inheritance Tax 2025-26 & 2026-27 — £325k NRB + £175k RNRB (HMRC)

HMRC Inheritance Tax for 2025-26 and 2026-27: £325,000 nil-rate band, £175,000 residence nil-rate band, 7-year gift taper relief, 36% charity rate, and spouse transfers.

Pension Drawdown Tax: How to Minimise Tax on Withdrawals (2025-26)

25% of your pension is tax-free, but the rest is taxed as income. Learn drawdown vs UFPLS, avoid emergency tax traps, and strategies to keep more of your pension.
Most searched ↑↓ navigate · ⏎ open