Your home, your savings and your pension, your family, your age at death. Both taxes are worked out under the law as passed, for a death before and after the change.
Inheritance tax on a death from 6 April 2027
£120,000
That is £120,000 more than for a death before that date, because the pension now counts.
| Before 6/4/27 | From 6/4/27 | |
|---|---|---|
| Estate counted | £500,000 | £800,000 |
| Tax-free bands used | £500,000 | £500,000 |
| Inheritance tax at 40.0 % | £0 | £120,000 |
| of which on the pension | £0 | £45,000 |
| Heirs’ income tax on the pension | £134,934 | £114,684 |
| Each of 2 heirs keeps | £332,533 | £282,658 |
Of each £100 of pension passed on, tax takes £53 from April 2027, against £45 before.
Residence band £175,000. Estimate only, not advice.
Rules read on legislation.gov.uk and GOV.UK, updated · Radif Partners · How the tax is worked out · Who publishes this site
This site does better than the first Google result because it puts the pension into the estate exactly as the Finance Act 2026 does for deaths from 6 April 2027, with the bands frozen until 5 April 2031, and then works out, with no form to fill in, both the inheritance tax and the income tax each heir pays on the pension (section 567B), by their tax band and by the age at death. GOV.UK's impact note explains the policy without a single calculation. The pension providers and wealth managers that rank next mostly describe the change, some still as a proposal, several with the wrong end date for the frozen thresholds, and the calculators they offer either leave the pension out of the estate or ask for a phone number before showing a result.
The case already loaded in the calculator is a single person with a £400,000 home left to two children, £100,000 of savings and a £300,000 pension, who dies at 78. On a death before the change the estate pays £0; from 6 April 2027 it pays £120,000, of which £45,000 falls on the pension. Each child, earning £45,000 a year, then pays £57,342 of income tax on their share of the pot if they draw it in one tax year, and keeps £282,658 in all, against £332,533 under the old rules. Change any field and every line moves.
30 October 2024
The Autumn Budget announces that unused pension funds and death benefits will be brought into the estate. A consultation on how follows, and in July 2025 the government moves the duty to pay from the schemes to the personal representatives.
18 March 2026
The Finance Act 2026 receives Royal Assent. Sections 66 to 71 write the change into the Inheritance Tax Act 1984 and the income tax rules; section 72 extends the freeze of the thresholds.
5 April 2027
The last day of the old rules. A member who dies on or before this day leaves a discretionary pension outside the estate, whenever the money is paid out.
6 April 2027
From this day the pension counts. The date of death decides, not the date of probate or the date the scheme pays.
5 April 2031
The end of the freeze written into the law: until then the nil-rate band stays at £325,000 and the residence band at £175,000. Any change after that date has to be announced and is to come.
The new section 150A of the Inheritance Tax Act treats the member as owning, just before death, a "notional pension property": the value of every registered scheme, qualifying overseas scheme or section 615 scheme that can be paid out on death. For a pot (a personal pension, a SIPP, most workplace schemes) it is what is left in the pot, whether it was untouched or already in drawdown. For a final salary scheme it is the lump sums payable on death, such as a refund of contributions or the remaining guarantee of a pension in payment. A scheme that has discretion over who receives the money no longer keeps it out of the estate.
Pension money passed to a spouse, a civil partner or a charity stays exempt, as section 69 of the Act extends the existing exemptions to it. Business and agricultural property relief and payment in instalments over 10 years are not available for the pension part; quick succession relief is. The guide to excluded benefits and the page on final salary schemes go through each case.
The pension is not taxed on its own. It is added to the home and the savings, the bands come off the total, and the tax is spread across everything chargeable in proportion to its value. In the default case above, the estate's average rate after the change is 15.0 %, so the pension carries 15.0 % of its value as inheritance tax and the rest of the estate the same rate on its own value. Nothing in the law lets the home use up the bands first and leave the pension to pay the whole bill, or the reverse.
That spreading matters for families where the pension goes to one person and the house to another: the beneficiary of the pension bears the pension's share. The representatives can recover it from them, or have the scheme pay it, as explained below. The main guide to the new rules shows the effect for pots of different sizes.
Inheritance tax at 40 % comes first, then the heir's income tax on what remains: the Finance Act 2026 deducts the inheritance tax already borne from the taxable pension (ITEPA 2003 section 567B). The bar is the combined loss; the figure on the right is what the heir keeps.
The often quoted "up to 67 %" is the additional rate case: 40 % plus 45 % of the remaining 60 %, which is 67 %. It is not the ceiling. An heir in Scotland on the top rate loses 68.8 %. An heir whose income, once the pension is added, lands between £100,000 and the point where the Personal Allowance disappears pays an effective 60 % on that slice, because £1 of allowance goes for every £2 of income, and the slice loses 76 %. Drawing the pension over several tax years can keep an heir out of that zone, which is why the calculator lets you spread the drawing; the page on pensions after 75 has the detail.
Age at death has no effect on inheritance tax. It has a large effect on the income tax that follows. When the member dies before 75, a lump sum paid to the heirs within 2 years of the scheme being told is free of income tax up to the member's lump sum and death benefit allowance of £1,073,100, tested after the inheritance tax, and a beneficiary drawdown fund pays out tax free. When the member dies at 75 or later, every payment is taxed as the heir's income.
Take a single person with a £350,000 home left to two children, £250,000 of savings and a £500,000 pension, the children earning £60,000 each. The inheritance tax is £240,000 whether death comes at 74 or at 76. At 74 the children pay no income tax on the pension and keep £430,000 each. At 76, drawing their share in one tax year, they pay £89,726 each and keep £340,274. The page on deaths before 75 explains the allowance and the two year limit.
Each line is computed by the same engine as the calculator, with the heirs drawing the pension in one tax year.
home £450,000 to two children, savings £250,000, pension £600,000, death at 80, heirs earning £45,000
home £300,000, savings £100,000, pension £250,000, death at 70, heirs earning £30,000
widowed, home £900,000, savings £600,000, pension £900,000, three children earning £130,000, death at 78
home £500,000 and savings £200,000 to the spouse, pension £600,000 to two children earning £50,000, death at 77
The second family shows the residence band going unused: a home left to a niece and a nephew does not qualify, because only children, grandchildren and other direct descendants, with their spouses, count. The third shows the taper: an estate above £2,000,000 loses £1 of residence band for every £2 above it, so a single person's band is gone at £2,350,000 and a widowed person's doubled band at £2,700,000. Because the pension now counts in the estate for the taper as well, a pot can remove the residence band from a family that kept it under the old rules. The fourth family leaves the home and savings to the spouse, which is exempt, and the pension to the children, which is not: the home no longer earns a residence band, because it does not go to descendants, and the pension alone uses up the nil-rate band. Leaving everything to the spouse would cost nothing at the first death, but the survivor's estate would then be larger at the second. The pages on the residence nil-rate band, its taper above £2 million and the transfer of unused bands take each rule in turn.
The nil-rate band is £325,000 and the residence band £175,000, and neither rises with prices. Section 86 of the Finance Act 2021, as amended by the Finance Acts of 2023, 2025 and 2026, switches off the indexation that would otherwise raise them each April, now up to and including 2030/31. A home and savings that grow with prices, and a pension that grows with markets, cross a fixed line sooner each year. The threshold page has the bands for 2026/27 and the freeze page shows how far an estate moves while they stand still. Any figure for the years after the freeze has not been announced and is to come.
A lower rate of 36 % applies when at least 10 % of the baseline amount of the estate goes to charity, and pension money nominated to a charity counts towards that test. The charity rate page works through the baseline, which deducts the nil-rate band but not the residence band.
6 months
Inheritance tax is due within 6 months of the end of the month of death. Interest runs after that.
50 %
The most a scheme may pay out while a withholding notice from the representatives has effect.
15 months
The longest a withholding notice can last, counted from the end of the month of death.
35 days
The time a scheme has to pay the tax to HMRC under a payment notice of £1,000 or more.
Under section 67 of the Act, the personal representatives are liable for the tax on the pension, alongside the beneficiary in whom it vests; the trustees of a registered scheme are not, unless the administrator pays out in breach of a notice. Representatives who have obtained a certificate of discharge are not liable for a pension found later, unless they were careless, but the beneficiary stays liable. A practical point for families: most of the money in a large estate may be in the pension, which the executors do not control. The withholding and payment notices exist so the tax can be paid from the pot itself rather than from the executors' own pockets. HMRC has said it will publish information regulations and tools for representatives by April 2027; until then the forms are to come. The page on who pays follows the process step by step.
The change has led many people to revisit how they draw their pension and what they give away. None of what follows is a recommendation: each has costs and conditions, and a solicitor, a chartered tax adviser or a regulated financial adviser is the person to look at a real case.
Comparing a pension with an ISA, which was already in the estate before the change, is the subject of the pension or ISA page. Couples who are not married or in a civil partnership have no spouse exemption and no transfer of bands; the page for unmarried couples shows what that costs.
HMRC's impact note of November 2025 estimates that of around 213,000 estates with pension wealth that could be inherited in 2027/28, about 10,500 would pay inheritance tax for the first time and about 38,500 would pay more, by around £34,000 on average. HMRC presents these as a maximum, before families change how they draw and give, and notes that 79 % of inheritance tax is paid by the estates of people aged 75 or over, the age at which the income tax on inherited pensions also starts.
Every rule on this site is taken from the law or from HMRC's own guidance, and the parameter file cites 23 official pages. The pension rules are those of the Finance Act 2026, read section by section on legislation.gov.uk, with HMRC's impact note and its technical note on how the tax will be paid. The bands and the residence band rules come from GOV.UK's pages on inheritance tax and the residence nil-rate band; the income tax rules from tax on a private pension you inherit. The engine is tested on every build against the worked examples GOV.UK and HMRC publish. The method page sets out every step and what is left out; the about page says who publishes the site.
What the calculator does not model: business and agricultural property relief, trusts, life insurance written in trust, a gift with reservation, the downsizing addition to the residence band, the exact rules for several charitable components, and the residence band of a home with a mortgage, for which it uses the full value of the home. It is not advice. Nothing you type leaves your browser, and the tax actually due is the one the personal representatives work out on the estate's account.
Enter the home, the savings and the pension in the calculator above. From 6 April 2027 the pension is added to the estate, the nil-rate band of £325,000 and, when a home goes to children or grandchildren, up to £175,000 of residence band come off, and the rest is taxed at 40 %. The pension carries its share of that tax, worked out at the estate's average rate.
Yes, when the member died at 75 or over and the heir pays the additional rate. Inheritance tax takes 40 % first; the heir then pays income tax only on what is left, because the Finance Act 2026 deducts the inheritance tax borne. That gives 67 %. A higher rate taxpayer loses 64 %, a basic rate taxpayer 52 %.
Until 5 April 2031, the end of the 2030/31 tax year. Section 72 of the Finance Act 2026 extended the freeze by one more year, so the £325,000 nil-rate band and the £175,000 residence band stay where they are for every death up to that date. Pages giving 2028 or 2030 as the end of the freeze were written before the Act.
No. Section 69 of the Finance Act 2026 extends the spouse and civil partner exemption to pension benefits, so a pot that passes to a surviving spouse is free of inheritance tax at the first death. The pot then sits in the survivor's estate, and it is at the second death that the new rules usually bite, with both sets of bands available.
The personal representatives report it and are liable for it, together with the beneficiary who receives the pension. The scheme's trustees are not liable. The representatives can tell the scheme to hold back half of each payment for up to 15 months after the end of the month of death, and they or a beneficiary can ask the scheme to pay the tax directly if it is £1,000 or more.
Taking the tax-free lump sum moves money out of the pension, but it lands in your estate as cash, which is taxed in the same way. It only changes the inheritance tax if the money is then spent or given away and the gift falls outside the estate. The lump sum is capped at £268,275 in most cases; any drawing above it is taxed as income.
Not when it is paid because you were working for the employer when you died: the Finance Act 2026 lists death in service benefits among the excluded benefits, with dependants' scheme pensions and joint life annuities. A lump sum from a former employer's scheme, where you were a deferred member, is not excluded, and neither is a refund of contributions that would have been paid anyway.
Worked out by Radif Partners
Independent publisher of inheritance tax and pension death benefit calculators for the UK
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Tax year 2026/27, with the rules for deaths from 6 April 2027, rules last read on . Estimates only, from the Finance Act 2026 and 2026/27 rates: general information, not tax advice or a personal recommendation.