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Unused Pension Pots Will Be Counted for UK Inheritance Tax From April 2027

Including defined‑contribution pension savings in estate values will raise tax bills for more families and is driving a surge in take‑up of tax‑efficient but higher‑risk strategies as HMRC guidance lags.

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From April 2027, retirement savings will be included when the tax bill for those inheriting money is calculated (Photo: Malte Mueller/Getty)
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Overview

  • The government confirmed the change will take effect in April 2027, meaning unused defined‑contribution pension pots will be added to estate valuations for inheritance tax purposes.
  • HMRC collections are already rising, with inheritance tax receipts of £730 million in May 2026 and total receipts of £8.5 billion in 2025–26, reflecting more estates falling into scope under frozen thresholds.
  • The Treasury estimates roughly 10,500 additional estates will have an IHT liability in the first year because of the pensions change, and about 38,500 estates will pay more tax overall.
  • Wealthy clients and advisers are increasingly turning to the Enterprise Investment Scheme because qualifying EIS shares held for at least two years can attract business relief and other tax breaks, but EIS investments carry high capital‑loss risk and are aimed at sophisticated investors.
  • Advisers warn that detailed HMRC rules are still missing, making clear planning hard; families can still use existing tools such as the £325,000 nil‑rate band, the £175,000 residence nil‑rate band, annual gifts, seven‑year rules, trusts, and whole‑of‑life policies in trust to manage liabilities.