02 June 2026
Upon a person’s death, pension benefits such as any unused pension funds and pension death benefits will be brought within the estate for Inheritance Tax purposes. This takes affect for deaths on or after 6 April 2027.
A technical note has been published by HM Revenue and Customs (HMRC) detailing how the legislation will operate for personal representatives, pension scheme administrators and beneficiaries, and the way information may be shared, and tax is to be collected.
The technical note provides information on:
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how notional pension property is identified, valued and allocated to beneficiaries
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who is responsible for reporting and paying any Inheritance Tax due
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the use of withholding notices and the pensions direct payment scheme
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how the reforms interact with existing Income Tax rules on pension death benefits.
These reforms aim to prevent pension schemes from being used and marketed to transfer wealth to a beneficiary without paying the tax liabilities due, rather than used as a savings plan to build up income for retirement. It also establishes a consistent approach to Inheritance Tax treatment of different pension types.
On 29 May 2026, section 10.3 of the note was updated to provide clarification on the position where a new pension related asset is discovered after an estate has been reviewed by HMRC, and a clearance certificate has already been issued (meaning the Inheritance Tax position is considered mostly settled).
In this case, the personal representatives are required to notify HMRC. HMRC have clarified that these representatives will not be personally liable for the tax and will not have to pay more tax on anything already covered by the certificate. Instead HMRC will calculate the additional tax due and collect it through the usual procedures.
As always, the Policy Team will provide further guidance and other supporting materials as new information is released.
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