Inheritance Tax changes
The government has published draft legislation (on 21 July 2025) on inheritance tax. If they’re approved by Parliament, the new rules will apply to the estate of anyone who dies from 6 April 2027 onwards. Any unspent pension pots and death benefits they have will be included in the value of their estate for the purposes of inheritance tax.
An unspent pension pot is the value of cash and investments held in a pension scheme at the date of the person’s death. This can be in a savings or drawdown account.
The draft legislation is still under consultation, and the final rules are expected in the 2025/26 Finance Bill. We’ll keep this page updated as more information becomes available.
However, now that we know a bit more about what the rules would mean, we’ve put together some FAQs.
FAQs
The personal representative is responsible for adding up the value of all the assets of the person who has died.
The new rules mean pensions are now included in these assets.
The personal representative and beneficiaries are jointly responsible for making sure the inheritance tax is paid on time. If it’s not, late payment fines/interest are charged.
Inheritance tax needs to be paid within 6 months of the date of death (not the date of notification) otherwise HMRC charges late payment fines/interest. This is the same as the current estate administration process.
Deaths up to and including 5 April 2027 will not have unspent pensions and death benefits included within the valuation of the estate for inheritance tax purposes.
Deaths on or after 6 April 2027 will have unspent pensions and death benefits included within the valuation of the estate for inheritance tax purposes.
Yes. There are some exemptions which apply to the portion of the estate which is being passed on. For example, inheritance tax won’t be charged to the beneficiaries of:
- Assets inherited by a spouse or civil partner
- Additional State Pension payments
- Certain Defined Benefit pensions
- Death In Service benefits for members who were actively employed at death
- Charity payments
- Joint life annuities (survivor’s rights)
The same income tax rules apply as before. If the person dies before the age of 75, their beneficiaries don’t generally have to pay income tax on their pension. If they die after the age of 75, the beneficiaries pay income tax at their marginal income tax rate after inheritance tax has been taken off.
All pension types offered by Fidelity are impacted:
- SIPP
- Master Trust
- Stakeholder pensions
- Group personal pension
- Section 32 buyout plans
- Own trusts
Income tax is a tax on earnings and income received during a person's life.
Inheritance tax is concerned with the transfer of a person's estate after they die.
If the person dies before the age of 75, their beneficiaries don’t generally have to pay income tax on their pension. But their pension assets will form part of the estate, so will be included in the valuation of the estate for inheritance tax purposes.
If they die after the age of 75, the beneficiaries pay income tax at their marginal income tax rate. They may be able to offset this income tax against any inheritance tax that’s already been taken from the pension assets in the death estate. This is to avoid paying tax twice.
The government estimates that 10,500 estates that wouldn’t have paid inheritance tax before will become liable for it under the new rules. And around 38,500 estates will pay more inheritance tax than they would have done previously.
We recommend speaking to a tax adviser or contacting your local tax office for personalised advice, as Fidelity does not provide tax advice.
UKM1025/3163600/CSO/1026