Worked estates
A £1 million pension pot: death before 75 against after
The inheritance tax on a large pot is the same at any age. The income tax that follows depends on a single birthday.
Inheritance tax on a death from 6 April 2027
£200,000
That is £200,000 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 | £1,500,000 |
| Tax-free bands used | £1,000,000 | £1,000,000 |
| Inheritance tax at 40.0 % | £0 | £200,000 |
| of which on the pension | £0 | £133,333 |
| Heirs’ income tax (under 75) | £0 | £0 |
| Each of 2 heirs keeps | £750,000 | £650,000 |
Of each £100 of pension passed on, tax takes £13 from April 2027, against £0 before.
Residence band £350,000. Estimate only, not advice.
For a pot of a million pounds, the date of death sets the first tax and the age at death sets the second. Take a widow with both of her late husband's bands, a £400,000 home and £100,000 of savings left to two children, and £1,000,000 in a pension. Dying before 6 April 2027, her estate of £500,000 owes nothing. From that date the pot joins it: £1,500,000, inheritance tax of £200,000, of which £133,333 is on the pension. That amount does not change with her age. What changes is income tax. If she dies at 72, under 75, lump sums paid to the children within 2 years are free of income tax as long as they fit inside her lump sum and death benefit allowance of £1,073,100, tested after the inheritance tax: each child keeps £650,000. At 80, the pension is taxed as the children's income and, drawn in one year, each keeps £455,033. The gap between the two ages is worth £194,967 to each child.
Law read and sums checked by Radif Partners · Editorial policy · How the tax is worked out
One estate, six ages at death
The engine keeps the widow's assets and changes only her age when she dies, for a death after the reform. Inheritance tax stays put. Income tax on the pension appears the moment she reaches 75.
| Age at death | Inheritance tax | Children’s income tax on the pension | Each child keeps |
|---|---|---|---|
| 65 | £200,000 | £0 | £650,000 |
| 72 | £200,000 | £0 | £650,000 |
| 74 | £200,000 | £0 | £650,000 |
| 75 | £200,000 | £389,934 | £455,033 |
| 80 | £200,000 | £389,934 | £455,033 |
| 88 | £200,000 | £389,934 | £455,033 |
The cliff is real: GOV.UK says that when the member dies under 75, most lump sums are tax free, and beneficiary drawdown or annuity income is tax free too; at 75 or over, every payment is taxed at the beneficiary's marginal rate.
The allowance that guards the lump sums
Before 75, the protection has a ceiling: the lump sum and death benefit allowance of £1,073,100, less any tax-free cash taken in life. HMRC's technical note explains that when inheritance tax is due, each lump sum death benefit is measured at its amount net of that tax. Here the pot of £1,000,000 carries £133,333 of inheritance tax, so only £866,667 is tested, which fits inside the allowance. The FAQ below shows what happens when tax-free cash was taken earlier.
Death at 80: income tax after inheritance tax
At 80, the children pay income tax on what they draw, less the inheritance tax borne on it under section 70 of the Finance Act 2026. Taken in one tax year, the pension costs them £389,934 together. Spread over ten years, the figure falls to £325,587, and each child keeps £487,207 rather than £455,033.
The calculator's case in full
The tool opens on a death at 72. The ledger below uses exactly the same inputs: widowed with both bands, two children on £45,000.
| Death before 6 April 2027 | Death from 6 April 2027 | |
|---|---|---|
| Estate counted for inheritance tax | £500,000 | £1,500,000 |
| Nil-rate band and residence band used | £1,000,000 | £1,000,000 |
| Inheritance tax | £0 | £200,000 |
| of which on the pension | £0 | £133,333 |
| Income tax paid by the heirs on the pension | £0 | £0 |
| Each of 2 heirs keeps | £750,000 | £650,000 |
Section 150A counts the whole pot in the estate in both cases, whatever the age. The death before 75 guide covers the two-year rule and drawdown, the after 75 guide the income tax, and the £2,000,000 page the taper an estate of this size approaches. A pot of this size is a case for the executors and a regulated adviser, not for a single web page.