Most unused pension funds and pension death benefits will be included in the value of your estate for inheritance tax (IHT) purposes for deaths on or after April 6, 2027, and HMRC has given more details about how the reforms will operate after this date. Inclusion in the estate does not automatically mean inheritance tax will be payable. This will depend on the available allowances and exemptions, who receives the benefits, and the type of pension benefit.
Pension scheme administrators, insurance companies and personal representatives will need to share relevant information with one another under the new process, but also with beneficiaries and HMRC following a pension scheme member’s death. This should mean personal representatives can establish the estate’s IHT liability and help HMRC check that the correct amount of tax is paid.
A recent technical note from HMRC also covers how pension funds and death benefits will be valued and treated for IHT, the rules governing the exchange of information, circumstances in which pension benefits may be withheld, where pension schemes can pay IHT directly, and how to get clearance from HMRC. This article reflects HMRC’s published position as at 1 October 2026. Further regulations and final guidance are expected before the changes take effect.
What does this mean for my personal representatives?
There are five stages when personal representatives and pension scheme administrators will need to share information, according to HMRC. These are:
- Notification of death and basic information, the latter should be requested by the personal representative and includes the value of the notional pension property.
- Further information requested by the personal representative when they are required to file an Inheritance Tax account and includes the share of the notional pension property attributable to each beneficiary.
- Withholding notice information for the personal representative and beneficiaries if the personal representative instructs the pension scheme administrator to withhold up to 50% of the notional pension property (and in cases where there is a pension transfer).
- Payment notice information for the personal representatives and beneficiaries if either instructs the pension scheme administrator to pay some or all the Inheritance Tax attributable to the notional pension property.
- Payment of lump sum death benefits that are tax-free for Income Tax purposes — information for the personal representative to determine whether the deceased’s lump sum and death benefit allowance has been exceeded. These benefits may still be subject to inheritance tax.
These stages are listed in the order in which they are most likely to occur. However:
- Not all these stages will necessarily occur. For example, further information is only required if an Inheritance Tax account needs to be filed, which will not be the case for all deaths.
- Stages may occur concurrently. For example, a personal representative may request basic information and further information and instruct a pension scheme administrator to withhold benefits, all at the same time.
Where deadlines are expressed in days, these are calendar days.
Source: GOV.UK
How is my personal representative identified?
Who can act as a personal representative?
Different legal definitions apply when requesting pension information and when issuing inheritance tax notices. Pension scheme administrators must verify the individual’s identity and authority to act.
- For income tax, the relevant definition is that in s.989 of the Income Tax Act 2007. This definition enables both personal representatives and prospective personal representatives to request, and receive, the relevant information required from a pension scheme administrator or insurance company, without necessarily accepting legal responsibility for IHT.
- For IHT, ‘personal representative’ is defined in s.272 of the Inheritance Tax Act 1984 and applies to acting named executors dealing with the estate administration or instructing a third party to do so. Named executors can meet this definition before a grant of representation is issued. A “prospective personal representative” is defined separately in s.226A(12) of the Act. This allows someone who expects to administer the estate, but does not yet meet the stricter definition of a personal representative, to issue a withholding notice and receive relevant information.
Source: STEP and section 2.1 of HMRC’s Technical Note 2
How can I prove to the pension scheme administrators who I am?
HMRC is preparing more guidance to help pension scheme administrators verify the authority and identity of personal representatives and distinguish “between situations where the individual is acting as a personal representative, or a prospective personal representative who is seeking a grant of representation on intestacy”, according to STEP.
HMRC’s technical note includes a draft copy of the guidance, and explains the steps pension scheme administrators should take if nobody administering the estate contacts them. STEP added: “Other sections of the note deal with valuing the notional pension property; reporting potentially exempt beneficiaries; initial assessment of IHT liability, its apportionment, and when an IHT account is required; issues arising when a beneficiary is a trust; excluded benefits; and clearance certificates discharging personal representatives from IHT liability relating to previously undiscovered pension benefits.”
While STEP welcomes the guidance, Emily Deane TEP, STEP’s Technical Counsel and Head of Government Affairs, said: “STEP remains concerned that the new rules place a heavy administrative burden on executors and may make dealing with a loved one’s estate slower, more complex and more expensive.”
HMRC plans to publicise the changes during winter and spring 2026–27 and publish guidance and supporting materials in spring 2027.
Please note: This article provides general information based on the rules and guidance available at the date of publication. Tax treatment depends on individual circumstances, and further guidance may be issued before April 2027. Please seek advice before making decisions about your pension or estate.
Contact us
If you would like to find out how these changes might affect you and your loved ones, please get in touch with us. We can help you understand the potential inheritance tax implications and whether specialist advice is needed.