For decades the standard estate-planning move was simple: spend everything else first and leave the pension, because defined-contribution pensions sat outside inheritance tax. That ends for deaths on or after 6 April 2027. The Finance Act 2026 — enacted law, Royal Assent 18 March 2026, not a proposal — brings most unused pension funds and death benefits into the estate.
Calculate yours — both regimes, side by side Track your whole estate freeToday, if you die with money still in a defined-contribution pension, it normally passes to your beneficiaries outside your estate — no inheritance tax, whatever its size. For deaths from 6 April 2027, that unused pension is counted in your estate alongside the house, the ISAs and everything else, and taxed at 40% above your available allowances.
The allowances themselves are unchanged: a £325,000 nil-rate band per person, plus up to £175,000 residence nil-rate band when a home passes to direct descendants, and anything left to a spouse or civil partner remains exempt without limit. What changes is how quickly a pension pushes the rest of the estate over those allowances.
Take a single homeowner leaving a £400,000 house and £200,000 of ISAs and savings to their children, with a £300,000 pension untouched. Under today's rules the estate is £600,000 against £500,000 of allowances (nil-rate band plus residence band): £100,000 taxable, £40,000 of tax. From April 2027 the pension counts too: a £900,000 estate, £400,000 taxable, £160,000 of tax. The change alone adds £120,000 — to a household that never thought of itself as inheritance-tax territory.
Married couples and civil partners still pass everything between each other tax-free and inherit each other's unused allowances, so the bill usually lands on the second death — which is exactly when the surviving household's pensions are counted too.
The residence nil-rate band shrinks by £1 for every £2 an estate exceeds £2 million, and is gone entirely at £2.35 million for a single band. Pensions counting in the estate will push many households over that threshold for the first time — so the pension change can cost you an allowance you thought was safe, a second-order effect that surprises people more than the headline change itself.
None of this is advice — the right move depends on your numbers, your health, your family and things no app can know. But the conversations happening with advisers ahead of 2027 cluster around a few themes: whether the old "pension last" drawdown order still makes sense or should flip; whether to draw more and gift earlier under the seven-year rule; whether life insurance written in trust should cover the expected bill; and whether wills written around the old treatment of pensions still do what their authors intended.
Every one of those starts with the same question: what would my household's bill actually be, before and after? That is the calculation our free tool does — no signup, nothing leaves your browser.
Yes. It was enacted in the Finance Act 2026, which received Royal Assent on 18 March 2026. It applies to deaths on or after 6 April 2027 — dying before that date, the old treatment applies.
The change targets unused funds and death benefits. A defined benefit scheme paying a survivor's pension to a spouse is a promised income rather than a pot, and dependants' scheme pensions are generally outside the new charge — but lump-sum death benefits from DB schemes can be caught. Scheme specifics matter; this is precisely where personal advice earns its fee.
No — the spouse and civil-partner exemption applies to pensions joining the estate just as it does to everything else. The tax question typically arrives on the second death, when the combined household estate passes to the next generation.
That is a personal-advice question, and rushing it can cost more than it saves: withdrawals are subject to income tax now, growth outside the pension may be taxed along the way, and dying before April 2027 means the old rules applied anyway. Know your number first, then decide with someone regulated to advise you.
Use the free calculator — it shows today's rules and the post-April-2027 rules side by side, including the residence nil-rate band taper. If you keep your whole estate in OwnWorth, the same picture stays current as values move.
Run the two-regime calculator Track the whole estate →
OwnWorth is a record-keeping and planning tool, not financial, legal or tax advice, and we are not regulated to give any. Figures you enter are your own; projections are estimates based on them.