Inheritance Tax On Pensions – What The New HMRC Guidance Means

HMRC has now published a detailed technical note on the future taxation of pensions for Inheritance Tax (IHT), providing further clarity on how the rules will operate from 6 April 2027.

This follows the government’s earlier announcement that most unused pension funds and death benefits will be brought into the scope of IHT, a significant shift in how pensions are treated as part of estate planning.

The latest guidance is aimed at advisers, pension schemes, and personal representatives, and begins to explain how the system will work in practice, although further detail is still expected.

What is changing?

From April 2027:

The technical note also sets out:

• How pension funds will be identified and valued
• Who is responsible for reporting and paying IHT
• How HMRC intends to manage information sharing and tax collection
• How these rules interact with Income Tax on pension death benefits

Why this matters for many of our clients

For many individuals, pensions have historically been an efficient way to:

From April 2027, this position changes materially. Pensions will need to be considered alongside other assets as part of a coordinated estate planning strategy, rather than sitting outside of it.

Charitable giving and the 36% IHT rate

The new guidance confirms an important point for planning:

Quick succession relief confirmed

The note confirms that quick succession relief will apply to pension assets in the same way as other estate assets.
This means:

Relief may be available to reduce the second IHT charge.

Income Tax and IHT – avoiding double taxation

One of the key concerns has been double taxation, where pension funds could be subject to both:

HMRC has provided some initial clarification:

• The portion of the pension used to pay IHT will not be subject to Income Tax
• This helps mitigate the risk of the same funds being taxed twice

However, the detailed mechanics are still to be confirmed, and further guidance is expected.

Gifting from pension withdrawals

The guidance also confirms that existing rules around gifting out of surplus income remain unchanged.

This means it may still be possible to:

This remains a valuable planning tool, particularly for those already drawing pension income.

A more complex administrative process

The new regime will also introduce additional complexity:

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These are designed to ensure IHT liabilities can be collected efficiently, but they will require greater coordination between parties.

Further guidance still to come

HMRC has made it clear that this is not the final position.

Work is ongoing, and we can expect:

Importantly, HMRC has stated that:

Further details will be published as the transitional regulations and supporting guidance are developed.

What this means in practice

This change represents a fundamental shift in retirement and estate planning.

For many clients, pensions have been:

From April 2027, that approach may no longer be optimal.

Planning considerations

If you hold significant pension assets, it may now be worth reviewing:

As with many tax changes, the details are evolving, but early awareness allows for measured, proactive planning rather than reactive decisions.

Final thoughts

The inclusion of pensions within IHT is one of the most significant changes to estate planning in recent years.

While the full details are still developing, the direction of travel is clear:

Pensions will no longer sit outside the estate in the way they historically have.

For those with larger, more complex estates, this is an important moment to reassess long‑term plans and ensure structures remain aligned with both tax efficiency and personal objectives.