Pensions and Inheritance Tax from April 2027: What Executors Need to Know

From 6 April 2027, most unused pension funds and pension death benefits will be included in the value of a person's estate for inheritance tax. The change was announced in the October 2024 Budget and is now law, the Finance Act 2026 received Royal Assent in March 2026. For decades, pensions have generally sat outside the estate, and their arrival inside it will bring a significant number of families into inheritance tax for the first time. Government estimates suggest around ten and a half thousand additional estates will face a charge in the first year alone.

What is changing

At present, unspent defined contribution pension pots usually pass to beneficiaries outside the estate, and outside inheritance tax. From 6 April 2027, most unused funds and death benefits will instead be counted within the estate and taxed at 40 per cent above the available nil-rate bands. Some benefits remain outside the new rules, including death in service payments from registered schemes, dependants' scheme pensions, and charity lump sums, and anything passing to a spouse or civil partner continues to benefit from the spouse exemption. The detail is genuinely technical, and executors and families should take advice from a solicitor or financial adviser on the pension aspects, this article is general information rather than advice.

Why it matters for house contents

Our concern is a practical consequence that has had far less press than the pension rules themselves. Once a pension is counted, many estates that comfortably sat below the inheritance tax threshold will sit above it, or near enough that every figure in the account matters. And that includes the household contents.

In estates with no tax exposure, contents figures have often been treated casually, a round number, an insurance schedule, a guess. That habit becomes expensive when the estate is taxable. An overstated contents figure means tax paid at 40 per cent on value that does not exist, and an understated one invites HMRC enquiry, penalties and interest. The safe ground is a formal valuation at open market value under Section 160 of the Inheritance Tax Act 1984, prepared as a written report by specialists and submitted with the account.

What executors should do now

For deaths from April 2027, executors will also carry new reporting responsibilities in respect of pensions, coordinating information with pension schemes within the existing six month window before interest runs. The practical preparation is the same as it has always been, only more so, establish accurate values early, across every part of the estate, and keep the evidence. For the contents of the property that means a professional valuation rather than an estimate, carried out soon after death, you do not need the grant of probate to arrange one.

How Aubreys can help

Aubreys provides fixed-fee probate valuations of house contents, jewellery, art and antiques across Surrey and London, prepared to Section 160 standard with a written report for HMRC, from £295 plus VAT depending on the size of the property, and confirmed in writing before any work begins. Where the estate later sells items, we carry them through to auction with a full paper trail. Our probate specialist can be reached directly on 07939 133427, or read more about our probate valuations in Surrey and probate valuations in London.

Frequently asked questions

When do the new pension rules start?

They apply to deaths on or after 6 April 2027. The legislation is in force now, having received Royal Assent in March 2026.

Do pensions left to a spouse pay inheritance tax?

Transfers to a spouse or civil partner continue to benefit from the spouse exemption. The changes principally affect pensions passing to other beneficiaries, and specialist advice should be taken on individual circumstances.

Does this mean more estates need formal contents valuations?

In practice, yes. Estates brought into inheritance tax by pension values need every figure in the account to be defensible, and household contents should be valued professionally at open market value rather than estimated.

What stays outside the new rules?

Death in service benefits from registered pension schemes, dependants' scheme pensions and charity lump sum death benefits are excluded. The position is technical and advice should be sought.