Worked estates
Inheritance tax with no children: one band and a pension
Without children or grandchildren, the extra allowance for a family home never applies. A pension counted in the estate from April 2027 makes the gap wider.
Inheritance tax on a death from 6 April 2027
£190,000
That is £80,000 more than for a death before that date, because the pension now counts.
| Before 6/4/27 | From 6/4/27 | |
|---|---|---|
| Estate counted | £600,000 | £800,000 |
| Tax-free bands used | £325,000 | £325,000 |
| Inheritance tax at 40.0 % | £110,000 | £190,000 |
| of which on the pension | £0 | £47,500 |
| Heirs’ income tax on the pension | £83,838 | £57,838 |
| Each of 3 heirs keeps | £202,054 | £184,054 |
Of each £100 of pension passed on, tax takes £53 from April 2027, against £42 before.
Residence band £0. Estimate only, not advice.
Someone with no children or grandchildren has only the nil-rate band of £325,000 against inheritance tax, unless married. The residence nil-rate band of up to £175,000 requires the home to pass to direct descendants, and nephews, nieces, brothers and sisters do not count, however close the family. Consider a single man whose £450,000 flat, £150,000 of savings and £200,000 pension go in equal thirds to a sister and two nephews. Dying before 6 April 2027, his estate is £600,000 and owes £110,000. From that date the pension is added: the estate is £800,000 and the bill £190,000, £47,500 of it charged on the pension. Had the same flat gone to a son or daughter, the bill would have been £120,000. Gifts to charity are exempt, pension benefits included, and leaving enough of the estate to charity lowers the rate on the rest from 40 % to 36 %.
Law read and sums checked by Radif Partners · Editorial policy · How the tax is worked out
Who counts as a direct descendant
HMRC's guidance on the residence nil-rate band draws the line at lineal descent: children, grandchildren and further down, step, adopted and foster children, children under a guardianship order, and the spouses or civil partners of any of them. Brothers, sisters, nephews, nieces, cousins, friends and unmarried partners fall outside. So a home left to any of them earns no residence band at all, and the estate is taxed above £325,000 alone. The GOV.UK summary of the rules gives the same threshold for anyone in that position.
The pension on top of a single band
For this kind of estate, the reform bites from the first pound. There is no residence band to absorb a modest pot, and here the nil-rate band is already filled by the flat. Every pound of the £200,000 pension adds 40 % to the bill, so the pension alone accounts for £80,000 of extra tax. The calculator above opens on this estate; the ledger below uses the same inputs, with three heirs earning £45,000 each and a death at 78.
| Death before 6 April 2027 | Death from 6 April 2027 | |
|---|---|---|
| Estate counted for inheritance tax | £600,000 | £800,000 |
| Nil-rate band and residence band used | £325,000 | £325,000 |
| Inheritance tax | £110,000 | £190,000 |
| of which on the pension | £0 | £47,500 |
| Income tax paid by the heirs on the pension | £83,838 | £57,838 |
| Each of 3 heirs keeps | £202,054 | £184,054 |
The heirs' income tax on the pension comes after the inheritance tax, because the death is at 75 or over. Brothers, sisters and nephews are taxed on it exactly as children would be.
Charity: an exemption and a lower rate
Gifts to charities are free of inheritance tax, and section 69 of the Finance Act 2026 extends that to pension benefits paid to a charity. There is a second effect. If at least 10 % of the baseline goes to charity, the rest of the estate is taxed at 36 %. HMRC’s manual defines the baseline as the estate after exemptions, less the nil-rate band available, plus the charity gift; the pension belongs to the same component as the rest of the estate. The table leaves a share of the house and savings to charity.
| Share of house and savings to charity | To charity | Rate | Inheritance tax | Left for the family, before income tax |
|---|---|---|---|---|
| 0 % | £0 | 40 % | £190,000 | £610,000 |
| 5 % | £30,000 | 40 % | £178,000 | £592,000 |
| 10 % | £60,000 | 36 % | £149,400 | £590,600 |
| 20 % | £120,000 | 36 % | £127,800 | £552,200 |
A gift just large enough to meet the test can leave the family with almost as much as no gift at all, because the lower rate applies to everything else. The charity rate page works through the baseline in detail.
Other routes people look at
Marriage or civil partnership brings the spouse exemption and a transferable band; the page on unmarried couples shows the cost of staying unmarried. Lifetime gifts to nephews and nieces leave the estate if the giver survives 7 years. Each of these is a personal decision, and a solicitor or a regulated adviser looks at a real situation.