Technical consultation launched on IHT reporting and payment processes for pensions

HM Revenue & Customs published a technical consultation on 30 October 2024 on the processes needed to bring most unused pension funds and death benefits into the value of a person's estate for Inheritance Tax purposes from 6 April 2027¹. The consultation ran from midday on 30 October 2024 to 11:59pm on 22 January 2025¹. It covers UK-registered pension schemes and is likely to be of interest to individuals, pension scheme administrators, pensions professionals, and tax and legal practitioners¹.

As announced at Autumn Budget 2024, from 6 April 2027 most unused pension funds and death benefits will be included within the value of a person's estate for Inheritance Tax purposes, and pension scheme administrators will become liable for reporting and paying any Inheritance Tax due on pensions to HMRC¹. The consultation document states that after the consultation the government will publish a response document and carry out a technical consultation on draft legislation for these changes in 2025¹.

The government's stated objective is to remove distortions which it says have led to pension schemes being increasingly used and marketed as a tax planning vehicle to transfer wealth, rather than for funding retirement, and to remove inconsistencies in the Inheritance Tax treatment of different types of pensions¹.

The consultation page was updated on 21 July 2025, when a summary of responses was published¹. That summary states that the consultation received 649 written responses in total, and that HMRC officials held 9 workshops with pensions and tax professionals and representative bodies during the consultation period². It says the government has decided not to proceed with the pension scheme administrator led process set out in the technical consultation document, and that personal representatives will instead be liable for reporting and payment of Inheritance Tax due on unused pension funds and death benefits from 6 April 2027². It also confirms that from 6 April 2027 all death in service benefits payable from registered pension schemes will be out of scope of Inheritance Tax, regardless of whether the scheme is discretionary or non-discretionary².

The summary sets out estimates of who is affected. Of around 213,000 estates with inheritable pension wealth in 2027 to 2028, it says 10,500 estates, or around 1.5% of total UK deaths, will become liable for Inheritance Tax where this would not previously have been the case, and around 38,500 estates will pay more Inheritance Tax than would previously have been the case². It adds that fewer than 10% of estates annually are forecast to have an Inheritance Tax liability in the coming years².

Why it matters for households

The change takes effect for pension member deaths on or after 6 April 2027³. From that date, most unused pension funds and death benefits will count towards the value of an estate for Inheritance tax purposes, which can increase the tax due and reduce what beneficiaries receive¹. The government estimates the average Inheritance Tax liability will increase by around £34,000 when pension assets are included in the value of the estate³.

Personal representatives, rather than pension scheme administrators, will be liable for reporting and paying the tax on pensions from 6 April 2027². The summary states that pension beneficiaries will become jointly and severally liable for any Inheritance Tax due on unused pension funds and death benefits to which they are entitled from the point at which they are appointed². It also states that pension scheme administrators must tell personal representatives the value of the pension for Inheritance Tax purposes within 4 weeks of receiving the member's death notification².

Death in service benefits payable from a registered pension scheme will be excluded from the value of an individual's estate for Inheritance Tax purposes¹. The summary notes that death in service benefits paid by non-discretionary pension schemes currently in scope, such as the NHS and other public sector schemes, will be brought out of scope from 6 April 2027². Existing exemptions for death benefits passing to a surviving spouse or civil partner, and to registered charities, are maintained³.

The summary states that the 6-month payment deadline is not intended to change under the personal representative led process². It says the government will introduce a new digitalised Inheritance Tax service in the 2027 to 2028 tax year².

What happens next

The consultation has concluded¹. The government says it will introduce legislation in Finance Bill 2025-26 to include the value of unused pension funds and pension death benefits within the member's estate on death³. It says HMRC will continue to work with industry experts to develop and refine the process, and will publish further guidance and tools to support personal representatives, pension scheme administrators and beneficiaries ahead of implementation in April 2027².