What executors must do with pensions from 2027
If someone dies on or after 6 April 2027, their personal representatives (executors under a will, or administrators if there's no will) become responsible for inheritance tax on most of their unused pensions, as well as the rest of the estate. That's a new job, and it can involve schemes and beneficiaries the executor has never dealt with.
Step by step
1. Find every pension
Look through paperwork, bank statements (for contributions or income) and emails. Ask the family. Use the free Pension Tracing Service for missing schemes. Don't forget old workplace pensions and pensions already in payment.
2. Tell each scheme about the death
Ask the scheme what evidence it needs of the death and your identity and authority. A grant of probate is not always needed at this stage: a named executor may be able to provide the will and other evidence before the grant. People expecting to become administrators can also request information once their identity and prospective authority are established. Ask each scheme:
- the date-of-death value of the pension benefits that count for inheritance tax (the scheme's "notional pension property");
- which benefits are payable, and to whom;
- which benefits are excluded (for example, qualifying death-in-service or dependants' scheme pension benefits), and which count in the estate but may be exempt because of who receives them. Exempt benefits remain part of the valuation, with the exemption claimed where an inheritance tax account is required. Further information about excluded benefits may also be required for that account.
3. Include pensions in the inheritance tax calculation
Add the pension value that counts to the other estate assets, then apply the relevant debts, exemptions, reliefs and available nil-rate bands. The standard rate is 40% on the taxable excess; a reduced charitable rate can apply. Tax is then apportioned to the relevant estate components. Do not simply split it using gross pension and other asset values: exempt beneficiaries and different reliefs can change the allocation. HMRC is developing a tool to assist this calculation.
4. Consider a withholding notice
Where there is reason to believe inheritance tax may be due on the estate and its pension benefits, a personal representative or prospective personal representative can give a registered pension scheme a valid withholding notice. It generally prevents payment of more than 50% of each affected beneficiary's entitlement. It does not recover benefits already paid.
Excluded benefits and payments to exempt beneficiaries are outside the restriction. Other exceptions include continuing annuities and certain benefits below £1,000. The notice ends when withdrawn, when the relevant tax and interest are paid, or 15 months after the end of the month of death, whichever is earliest. It does not extend the tax payment deadline.
5. Decide how the tax on pensions will be paid
Beneficiaries or personal representatives can give a registered pension scheme a valid payment notice to pay the pension-related inheritance tax and any interest directly to HMRC. The amount requested must be at least £1,000, with sufficient unpaid benefits available. The scheme must pay within 35 days beginning with receipt of the valid notice. A prospective personal representative cannot issue a payment notice. Alternatively, tax may be paid from other estate funds or by beneficiaries; the allocation and reimbursement must be recorded.
6. Keep to the deadlines
Inheritance tax is normally due by the end of the sixth month after the month of death. HMRC charges interest on late payment. Pension values can take time to arrive, so contact schemes early.
7. Keep records
Keep copies of every valuation, notice and payment. Beneficiaries of pensions may ask how the tax was worked out, and HMRC may check.
Who's who
| Person | Role from April 2027 |
|---|---|
| Personal representatives | Report the estate, including pensions, and are responsible for the inheritance tax |
| Pension scheme administrator | Provides information and acts on valid notices; trustees or managers determine beneficiaries under scheme rules |
| Beneficiaries | Receive benefits; become jointly liable with personal representatives for tax attributable to benefits once entitled; can issue a payment notice |
| HMRC | Collects the tax |
Pensions that aren't taxed
Excluded benefits are left out of the pension value included in the estate. Exempt benefits are included, with the relevant exemption applied. The scheme must distinguish the two.
- Benefits passing to a spouse or civil partner normally qualify for exemption; special residence circumstances can limit it.
- Qualifying death-in-service benefits from a registered pension scheme are excluded, whether paid as a lump sum, income or another benefit. Ordinary pension savings are not excluded merely because the member dies while employed.
- Qualifying dependants' scheme pensions and certain annuities purchased with the member's lifetime annuity are excluded. HMRC's August 2026 clarification requires benefits to be payable only as excluded benefits: choosing a scheme pension from non-excluded alternatives does not itself create exclusion.
- Benefits passing to qualifying charities can be exempt.
Inheritance tax exclusion does not necessarily mean freedom from Income Tax. Dependants' scheme pensions remain taxable as pension income.
When to get help
Use the scheme administrator for benefit and valuation questions and HMRC's published guidance for tax reporting and payment procedures. Separate the estate's inheritance tax calculation from any Income Tax due on a beneficiary's pension payments. This checklist explains the process; it cannot settle an individual estate's liability.
FAQ
Do executors have to deal with pensions from 2027? Yes. For deaths on or after 6 April 2027, personal representatives are responsible for inheritance tax on most unused pensions, as part of the estate.
What is a withholding notice? A valid notice that generally prevents a registered scheme paying more than 50% of each affected beneficiary's entitlement. Exclusions apply. It ends on withdrawal, payment of the relevant tax and interest, or 15 months after the end of the month of death, whichever comes first.
Can inheritance tax be paid directly from the pension? Yes, through a valid payment notice to a registered scheme for at least £1,000 of pension-related tax and interest, with sufficient unpaid benefits available. The scheme has 35 days beginning with receipt of the valid notice to pay HMRC.
When is inheritance tax due? Normally by the end of the sixth month after the month of death. Interest is charged after that.
Sources
- GOV.UK: Technical note, inheritance tax on pensions — scope, notices and liability
- GOV.UK: Inheritance tax on unused pension funds and death benefits
- GOV.UK: Pay your inheritance tax bill
- GOV.UK: Find pension contact details
- GOV.UK: Technical note 2, further information on inheritance tax and pensions
- legislation.gov.uk: Finance Act 2026, Part 2
General information, not a personal recommendation. Tax treatment and pension rights depend on the rules and individual circumstances.