Government publishes consultation outcome confirming personal representatives liable for IHT on pensions from April 2027

HM Revenue & Customs published the outcome of its technical consultation on inheritance tax on pensions on 21 July 2025, confirming who is liable for reporting and paying the tax when unused pension funds and death benefits are brought into scope from 6 April 2027¹. The consultation ran from midday on 30 October 2024 to 11:59pm on 22 January 2025¹.

The original consultation proposed that pension scheme administrators would be liable for reporting and paying any inheritance tax on the pension element of an individual's estate². The published response instead announced that personal representatives, rather than pension scheme administrators, will be liable for reporting and paying any inheritance tax due on unused pension funds and death benefits from 6 April 2027². The measure takes effect for pension member deaths on or after 6 April 2027².

The government also confirmed that all 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. Dependant's scheme pensions from a defined benefit arrangement, or from a collective money purchase arrangement, are also excluded and will not be in scope².

The government estimates that, of around 213,000 estates with inheritable pension wealth in 2027 to 2028, 10,500 estates will have an inheritance tax liability where previously they would not, and approximately 38,500 estates will pay more inheritance tax than would previously have been the case². The average inheritance tax liability is expected to increase by around £34,000 when pension assets are included in the value of the estate². These estimates are static and do not take into account potential behavioural changes, such as tax planning or drawing down pension funds faster, and the government says they should be viewed as a maximum².

The government's stated objective is to remove distortions which 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 pensions². It cites the introduction of pension freedoms in 2015 and the abolition of the lifetime allowance in March 2023 as factors².

Why it matters for households

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 purposes¹. This affects individuals inheriting estates within the scope of inheritance tax, including beneficiaries of any unused pension funds or death benefits included in those estates, as well as personal representatives, their advisers and pension scheme administrators².

Personal representatives already report and pay inheritance tax on the deceased's estate, including for non-discretionary pension schemes. They will now be required to report and pay the inheritance tax due on discretionary pensions, and to report the amount of tax attributable to each pension scheme². Around 75% of IHT400 forms are submitted by agents, with the remaining 25% coming from non-professional personal representatives².

The government says most estates will continue to have no inheritance tax liability after 6 April 2027². Where an estate does have inheritable pension wealth and an inheritance tax liability, the measure is expected to have an impact on families going through bereavement in relation to additional administration of the estate². The existing inheritance tax principles providing exemption for death benefits passing to a surviving spouse or civil partner, and registered charities, will be maintained².

What happens next

The government 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 their death, regardless of whether the pension scheme administrators or scheme trustees have discretion over the payment of any death benefits². The measure takes effect in respect of pension member deaths on or after 6 April 2027².