Guide · checked 18 September 2026

Inheritance tax after April 2027

Fewer than one in twenty estates pay inheritance tax today. From 6 April 2027 unused pensions count, and about 10,500 more estates pay in the first year, with 38,500 paying more. Here is how it works.

The bands

Everyone has a nil-rate band of £325,000.
If the home goes to children or grandchildren there is a further residence band of £175,000. It shrinks by £1 for every £2 the estate is over £2m.
Married couples and civil partners pass anything unused to the survivor, so up to £1m can be tax free on the second death. Everything left to a spouse is exempt on the first death.
Both bands are frozen until April 2031.

Above the bands the rate is 40%, or 36% if at least a tenth of the estate goes to charity.

What changes on 6 April 2027

Unused pension pots and most lump-sum death benefits are counted in the estate for deaths from that date. Pensions left to a spouse or to charity stay exempt. The personal representatives are responsible for the tax; the scheme can hold back up to half the pension for 15 months to pay it. If the person died at 75 or over, the beneficiary also pays income tax on what they draw, so the combined rate on a pension can be 52% or more.

Gifts

£3,000 a year is always free of tax, plus £250 to any number of people and wedding gifts.
Regular gifts out of income, that leave your standard of living intact, are exempt.
Larger gifts fall out of the estate after seven years. If you die within seven years they use the nil-rate band first; only gifts above the band are taxed, on a sliding scale after three years.
Giving away the house and staying in it rent free does not work: it stays in the estate.

Questions to take to a regulated adviser

Should the pension be drawn, nominated to a spouse, or left as it is?
Is regular gifting from income realistic, and how should it be recorded?
Would leaving 10% to charity cut the bill on the rest?
Does the will keep the residence nil-rate band?

Only an adviser authorised by the Financial Conduct Authority can recommend a product or a pension decision. The Autumn Budget is on 28 October 2026 and could change any of the above; this page is dated for that reason.

Sources: GOV.UK inheritance tax pages; HMRC technical note on pensions (May 2026); Finance Act 2026; OBR inheritance tax forecast (2026).