UK inheritance tax reforms to include pensions raise family bills

HMRC confirmed that from 6 April 2027 most unused private pension pots and pension death benefits will be treated as part of an estate for inheritance‑tax purposes. The change could push many estates over the 40 % tax threshold, increase probate paperwork and result in larger tax bills for families. Tim Grimsditch of Unbiased said, "The latest HMRC guidelines … show that most unused pension funds … will be included in the value of a person's estate for inheritance tax purposes."

Late‑filing penalties for the IHT400 return have risen 35 % over the past five years, with 5,200 estates fined in 2024‑25 and total penalties of £3.1 million. The return now contains 122 questions and often requires extensive valuations, leading to delays and higher risk of penalties. Duncan Mitchell‑Innes of TWM warned, "People often underestimate the complexity of the UK’s IHT rules." The upcoming pension inclusion is expected to add further pressure on executors and increase the likelihood of penalties.