Spouses, civil partners and pensions after April 2027

If you're married or in a civil partnership, pension death benefits passing to your spouse or civil partner normally remain exempt from inheritance tax after 6 April 2027. A limit can apply where the deceased was a long-term UK resident and their spouse or civil partner was not; elections and other rules can affect that position. The second death can bring a separate liability on the survivor's estate, including inherited pension funds still available to pass on.

What's exempt and what isn't

Situation	Inheritance tax from 6 April 2027
Pension paid to a surviving spouse or civil partner	Included in the estate, normally with spouse exemption
Qualifying dependant's scheme pension (e.g. widow's pension from a final salary scheme)	Excluded, subject to the benefit conditions below
Qualifying death-in-service benefit from a registered scheme, whether lump sum or income	Excluded
Pension paid to children or others on the first death	Counts towards the estate
Inherited pension funds still available to pass on when the survivor dies	Generally count towards the survivor's estate
Lump sum or drawdown fund paid to an unmarried partner	Generally counts; no spouse exemption. A qualifying dependant's scheme pension may instead be excluded

Excluded dependants' scheme pension benefits must be payable only as excluded benefits. Selecting a scheme pension where non-excluded alternatives were available does not itself make the value excluded. The benefit's terms matter, and Income Tax on a dependant's scheme pension is a separate question.

The second death

A survivor's estate can have up to £1 million of combined bands: two £325,000 nil-rate bands and two residence nil-rate bands of up to £175,000, subject to eligibility and claims for unused percentages. A qualifying home must pass to direct descendants and its qualifying value limits the residence allowance. The £1 million is not automatic.

The residence band tapers by £1 for each £2 that the relevant estate exceeds £2 million. This value is measured after liabilities but before spouse exemption and other exemptions or reliefs. An in-scope pension passing to a spouse can therefore affect the first estate's taper calculation and the unused residence allowance available to transfer. Benefits excluded altogether, such as a qualifying dependant's scheme pension, are different. Tapering must also be considered on the survivor's death.

Before April 2027, discretionary pension death benefits were usually outside that calculation. From April 2027, most unused pension funds and death benefits are included. This can create or increase inheritance tax on the survivor's death, depending on what remains, who receives it and the bands available.

Example

Ben dies first and all his estate and pension benefits pass to his wife Ann with full spouse exemption. At Ann's later death, after 6 April 2027, her home and savings are worth £800,000 and in-scope pensions total £400,000. Everything passes to their children. Assume she qualifies for the full £1 million of bands, including transferable unused bands and a qualifying home worth at least £350,000.

Ann's estate including pensions: £1,200,000
Taxable above the bands: £200,000
Inheritance tax at 40%: £80,000

If the same pension benefits were discretionary and excluded under the pre-April 2027 rules, the estate counted in this comparison would have been £800,000 and no inheritance tax would arise on these assumptions.

Illustrative, not advice. Uses 2026/27 band amounts and assumes no relevant gifts, additional reliefs or liabilities, full spouse exemption and no residence-band taper. It shows inheritance tax only; beneficiary Income Tax is separate.

Unmarried couples

Unmarried partners don't get the spouse exemption. An in-scope lump sum or drawdown fund paid to an unmarried partner counts towards the estate and can be taxed on the first death. A qualifying dependant's scheme pension may be excluded, subject to the scheme rules and benefit conditions above. Unmarried partners cannot transfer unused nil-rate bands to one another. Useful information to check includes:

the beneficiaries recorded on each pension's expression of wish;
what a will or the intestacy rules would do with the rest of the estate;
check what each scheme pays to a partner who isn't a spouse or civil partner.

Things to check now

Up-to-date expression of wish forms on every pension.
Wills for the rest of the estate. Pension benefits generally pass under scheme rules; trustees may consider an expression of wish without being bound by it.
Which inherited benefits can continue to another beneficiary on the survivor's death.
Whether a scheme pays a qualifying dependant's scheme pension that is excluded from inheritance tax, and how its Income Tax treatment differs.

FAQ

Is a pension left to my spouse taxed from 2027? Normally it qualifies for spouse exemption, but special long-term residence circumstances can limit that exemption. The benefit remains included in the estate valuation, so the residence-band taper may still be affected.

What happens on the second death? Inherited pension funds still available to pass on generally count alongside the survivor's other in-scope pensions. Tax depends on the recipient, exemptions, reliefs and available bands. An income entitlement that ends at death is not an unused pension pot.

Are unmarried partners treated the same? No spouse exemption or transfer of unused nil-rate bands applies between unmarried partners. However, a qualifying dependant's scheme pension can be excluded under its own rules.

Is a widow's pension from a final salary scheme taxed? A qualifying dependant's scheme pension is excluded from inheritance tax, subject to the benefit conditions explained above. It remains taxable as pension income for Income Tax purposes.

Sources

General information, not a personal recommendation. Tax treatment and pension rights depend on the rules and individual circumstances.