Confirmed change
Unused pensions and Inheritance Tax
From 6 April 2027, most unused pension funds and pension death benefits will be brought into a person’s estate when calculating Inheritance Tax.
The change is now confirmed in the Finance Act 2026. On 27 August 2026, HMRC published a second technical note explaining more about how the new system is expected to operate.
At present, many discretionary pension death benefits can usually pass outside the deceased person’s estate for Inheritance Tax purposes. This has made pensions an important part of wider estate-planning conversations.
From April 2027, the value of most unused pension funds and death benefits will instead need to be taken into account alongside the deceased person’s other assets.
Why this matters
A person whose home, savings and investments appear to fall below the Inheritance Tax threshold may have a different overall position once unused pension funds are included.
How will the process work?
Personal representatives will be responsible for reporting the pension value and paying any Inheritance Tax due as part of the administration of the estate.
Pension scheme administrators will need to provide the information required to calculate the estate’s position. Information may need to pass between:
- personal representatives;
- pension scheme administrators;
- pension beneficiaries; and
- HMRC.
HMRC’s latest note also addresses circumstances in which part of a pension benefit may be held back while the tax position is confirmed. It is expected to be possible, in appropriate cases, for tax to be paid directly from the pension scheme.
Further information and practical guidance are expected from HMRC in autumn 2026.
Important distinction
Will every inherited pension be taxed?
No. Including a pension in the estate does not automatically mean that Inheritance Tax will be payable.
Most estates do not currently pay Inheritance Tax, and the usual exemptions and allowances will continue to matter. In particular:
- transfers to a surviving spouse or civil partner will generally remain exempt;
- gifts to registered charities will generally remain exempt;
- the available nil-rate bands will still need to be considered; and
- death-in-service benefits from registered pension schemes are expected to remain outside the scope of the reform.
A future change, not a current tax rule
The legislation is confirmed, but it applies to deaths on or after 6 April 2027. Client communications should distinguish clearly between the law as it stands today and the future implementation date.
Planning implications
What might need reviewing?
The change does not mean that everybody with a pension needs to rewrite their Will. A Will controls assets within the estate, while pension benefits are usually governed by the pension scheme rules and any expression of wishes or nomination held by the provider.
What may need reviewing is the wider plan. Relevant questions may include:
What is the current value of the client’s pension funds and other death benefits?
Who is named in the pension expression of wishes or nomination?
How do the pension arrangements fit with the provisions of the Will?
Could the additional pension value bring the estate into an Inheritance Tax position?
Is specialist financial, tax or legal advice needed before decisions are made?
Are executors likely to have enough accessible funds to deal with administration expenses and any tax due?
Elephant Legal’s practical approach
Clients with substantial unused pension funds should be encouraged to review their Will, pension nominations and overall estate plan together. Where tax or investment advice is required, the matter should be coordinated with an appropriately qualified adviser.
Immediate procedural change
Old IHT100 forms will no longer be accepted
From 1 September 2026, HMRC will reject earlier versions of the IHT100 forms.
The IHT100 suite is used to report certain lifetime transfers and Inheritance Tax events involving trusts. This may include chargeable lifetime transfers, ten-year trust charges and charges when property leaves a relevant property trust.
This is primarily an operational issue for tax advisers, trustees and specialist practitioners. It is not the standard Inheritance Tax form used to report every estate after a death; depending on the circumstances, the IHT400 process may apply instead.
Use the current versions
Any saved PDFs, internal templates or guidance notes that link directly to an old form should be replaced. The safest approach is to start from HMRC’s live Inheritance Tax forms collection on GOV.UK.
Status check
What has not changed this week?
Lasting Powers of Attorney
The Office of the Public Guardian continues to advise that LPA registration takes approximately 8 to 10 weeks, including the statutory four-week waiting period.
Client communications should continue to explain that registration is not immediate.
Cohabitation and intestacy
The government consultation closed on 14 August 2026, but no outcome or new legislation has been published.
An unmarried partner does not currently have the same automatic rights under the intestacy rules as a spouse or civil partner.
Probate applications
The probate application fee remains £526 for estates valued above £5,000. There is no application fee where the estate is valued at £5,000 or less.
Existing probate and executor information should use the current figure.
Reform of the law of Wills
The Law Commission’s proposed new Wills Act remains under government consideration. No new Act has been brought into force.
Existing signing and witnessing requirements continue to apply.
For advisers and referrers
Professional action points
Avoid automatic Will rewrites
The pension reform is a reason to review the complete estate plan, but it does not automatically require a different Will in every case.
Identify substantial pension funds
Intake and review conversations should establish whether significant unused pension funds or death benefits may affect the client’s future Inheritance Tax position.
Coordinate specialist advice
Clients may need joined-up advice from their Will writer, financial adviser, tax adviser or solicitor. The precise combination will depend on the complexity of the estate.
Be clear about status and dates
Communications should say whether a development is confirmed, awaiting implementation or still only a proposal. The pension change is confirmed but does not take effect until 6 April 2027.
Use live HMRC form pages
Avoid retaining links to individual historic PDFs where a live HMRC forms collection is available. This reduces the risk of using an obsolete version.
Further reading
Official sources
This briefing is based on current information from HMRC, the Office of the Public Guardian, HM Courts & Tribunals Service, the government and the Law Commission.
The Elephant Legal view
A review should look at the whole plan
The pension reform is a useful reminder that a Will should not be considered in isolation. Pension nominations, property ownership, savings, investments, lifetime gifts and the needs of intended beneficiaries can all affect whether an estate plan works as expected.
For most people, the right first step is not an immediate rewrite. It is a calm, properly informed review of what they own, how those assets will pass and whether specialist advice is needed.