The revenue over time
The forecast revenue builds over the first years of the reform. HMRC's published costing rises from +£710 million in 2027 to 2028, the part-year of introduction, to +£1,485 million in 2028 to 2029, +£1,600 million in 2029 to 2030 and +£1,665 million in 2030 to 2031 (HMRC, as at July 2026, subject to change). For scale, the OBR forecasts total inheritance tax receipts from all causes at £8.7 billion for 2025 to 2026 (OBR, as at July 2026, subject to change).
| Tax year | Forecast Exchequer impact |
|---|
| 2027-28 (part year) | +£710 million |
| 2028-29 | +£1,485 million |
| 2029-30 | +£1,600 million |
| 2030-31 | +£1,665 million |
Source: HMRC policy paper, Exchequer impact table, as at July 2026 and subject to change. These are static costings that do not allow for behavioural change, so actual figures may differ. UK-wide.
What is in scope and what is excluded
The reform reaches most unused pension wealth but carves out several categories. In scope are most unused pension funds and death benefits held on death; excluded categories include death in service benefits from a registered scheme, dependants' scheme pensions and certain joint life annuities (gov.uk, technical note, as at July 2026, subject to change). Transfers to a spouse or civil partner remain generally exempt from inheritance tax (gov.uk, as at July 2026, subject to change).
| Position from 6 April 2027 (planned) | Treatment |
|---|
| Most unused pension funds and death benefits | Brought into the estate for IHT |
| Death in service benefits (registered scheme) | Excluded |
| Dependants' scheme pensions; certain joint life annuities | Excluded |
| Transfer to spouse or civil partner | Generally exempt |
| Who reports and pays | Personal representatives of the estate |
Source: gov.uk technical note on inheritance tax on pensions, as at July 2026 and subject to change. This is a planned reform whose detail may alter before it takes effect.
How the bands apply. Where a pension is counted in an estate, it is taxed under the ordinary inheritance tax rules, not a special pension rate: a £325,000 nil-rate band per person, up to £175,000 of residence nil-rate band where a home passes to direct descendants (up to £500,000 per person, up to £1,000,000 for a couple who can share unused bands), and 40% on value above the threshold, or 36% where at least 10% of the net estate passes to charity (
gov.uk, as at July 2026, subject to change). These thresholds are frozen to the end of the 2030-31 tax year (5 April 2031), a freeze extended by a further year at Budget 2025 (26 November 2025) having previously been set to run to 2029-30 (
gov.uk, as at July 2026, subject to change).
What the numbers mean
Read together, the figures describe a reform that is narrow in reach but meaningful for those it touches. Around 10,500 newly liable estates and 38,500 paying more sit against the roughly 213,000 estates with inheritable pension wealth in 2027 to 2028, so a large share of pension-holding estates is expected to see no new charge at all (HMRC, as at July 2026, subject to change). None of this changes the 40% rate; it widens the base by adding pension wealth on top of it.
For the estates that are affected, the average increase of around £34,000 is not trivial, and the interaction with income tax on inherited pensions can add a second layer, since HMRC treats that as a separate charge depending broadly on the age reached at death (gov.uk, as at July 2026, subject to change). Whether any of this affects a particular family depends entirely on the size and shape of the estate, the beneficiaries and the exemptions in play, so it can be worth discussing the figures with a qualified professional rather than reading a national estimate as a personal outcome. HMRC describes its costings as static estimates that do not allow for behavioural change, and forecasts can be revised at any fiscal event.
Scotland, Wales and Northern Ireland
Inheritance tax is a UK-wide tax, so the £325,000 nil-rate band, the up to £175,000 residence nil-rate band, the 40% rate and the planned 2027 pension reform apply the same way in England, Wales, Scotland and Northern Ireland (gov.uk, as at July 2026, subject to change). What differs across the nations is the surrounding succession and estate-administration law, such as Scotland's legal rights for spouses and children and its use of confirmation rather than a grant of probate. The HMRC impact figures above are collected UK-wide and are not broken down by nation.
Sources and methodology
Every figure on this page comes from a named official source and was checked against that source before publication. No number has been estimated, rounded beyond the source, or extrapolated. Where a source gives a forecast or a static costing, it is described as such. The sources used are listed below with their reference periods.
- Estates affected, average increase, Exchequer impact: HMRC, Inheritance Tax on unused pension funds and death benefits (around 213,000 estates with pension wealth, 10,500 newly liable, 38,500 paying more, around £34,000 average increase, revenue +£710m to +£1,665m). Reference year 2027-28 onwards.
- Reform mechanics, scope and exclusions: gov.uk, technical note on inheritance tax on pensions (effective 6 April 2027; death in service and other exclusions). As at July 2026.
- Current pension position: gov.uk, inheriting a private pension. As at July 2026.
- Income tax on inherited pensions: gov.uk, tax on pension death benefits (age-related treatment). As at July 2026.
- Core rates, allowances and freeze: gov.uk, Inheritance Tax and gov.uk, thresholds from 6 April 2028 (£325,000 NRB, up to £175,000 RNRB, 40%/36%, frozen to end of 2030-31 (5 April 2031)). As at July 2026.
- Total IHT receipts (context): Office for Budget Responsibility, Inheritance tax (£8.7bn, 0.3% of national income, 2025-26 forecast).
Frequently asked questions
How many estates will the 2027 pension change affect?
HMRC estimates that around 10,500 estates will become liable to inheritance tax that would not have been, and roughly 38,500 will pay more, out of around 213,000 estates with inheritable pension wealth in 2027 to 2028 (HMRC, as at July 2026, subject to change). Most estates are expected to have no inheritance tax liability even after the change.
How much more inheritance tax will affected estates pay?
HMRC expects the average inheritance tax liability among affected estates to rise by around £34,000 once pension assets are counted from 6 April 2027 (HMRC, as at July 2026, subject to change). This is an average across affected estates and does not allow for behavioural change, so an individual estate could differ widely depending on its size and shape.
How much revenue is the reform expected to raise?
HMRC's published costing runs from +£710 million in 2027 to 2028 to +£1,485 million in 2028 to 2029, +£1,600 million in 2029 to 2030 and +£1,665 million in 2030 to 2031 (HMRC, as at July 2026, subject to change). These are static costings and can be revised at a fiscal event.
Does the reform mean most people with a pension will pay inheritance tax?
No. HMRC states that most estates will continue to have no inheritance tax liability after 6 April 2027, because the majority fall below the available thresholds even once a pension is added (HMRC, as at July 2026, subject to change). Whether a given estate is affected depends on its total value against the £325,000 nil-rate band and any residence band (gov.uk, as at July 2026, subject to change).
Are all pensions caught by the 2027 change?
No. The reform brings most unused pension funds and death benefits into the estate, but excludes categories such as death in service benefits from a registered scheme, dependants' scheme pensions and certain joint life annuities (gov.uk, as at July 2026, subject to change). It is a planned reform whose detail may alter, and our note on the 2027 pension changes covers the scope more fully.
Is the impact the same across the UK?
Yes. Inheritance tax is a UK-wide tax, so the pension reform, the £325,000 nil-rate band and the 40% rate apply the same way in England, Wales, Scotland and Northern Ireland (gov.uk, as at July 2026, subject to change). The HMRC impact figures are UK-wide and not split by nation, though surrounding succession law differs, particularly in Scotland.
Should I change my pension because of the 2027 reform?
This is general information, not advice, and pensions are regulated products, so there is no single answer for everyone. Drawing a pension can trigger income tax and affects retirement funding, while leaving it invested has its own consequences, all depending on circumstances (gov.uk, as at July 2026, subject to change). Many people choose to discuss this with an FCA-authorised financial adviser who can weigh the whole picture.
About Fairchild Oldfield
The Fairchild Oldfield team brings together estate planning, tax, independent financial advice and client care, working with families across England and Wales.
Fairchild Oldfield are estate planning specialists and will writers, not a firm of solicitors. This article is general information based on practical experience, not legal, tax or financial advice.
Important: This article is general information only and is not legal, tax or financial advice. Reading it does not create a professional relationship. It is based on the law of England and Wales, and other UK jurisdictions may differ. Figures and rules are current as at July 2026 and are subject to change, and the April 2027 pension reform is a planned change whose detail may alter. Before acting, many people choose to seek advice from a suitably qualified professional, such as a solicitor, a STEP practitioner, an accountant, or an FCA-authorised financial adviser, who can consider your individual circumstances.
