Administering An Estate Affected By The New Pension Inheritance Tax Rules

On 11 May 2026, HMRC published a technical note about changes to Inheritance Tax on pensions. These changes will apply where someone dies after 6 April 2027.

In broad terms, after 6 April 2027, money left in a pension and certain pension death benefits will usually be counted as part of the person’s estate for Inheritance Tax. This is likely to give personal representatives more to do and may slow down the administration of both the estate and the pension benefits.

Any Inheritance Tax due on pension-related amounts will normally have to be paid by the end of the sixth month after the death. If it is paid late, interest will be charged.

Many pension schemes give the trustees or managers discretion to decide who should receive death benefits and how much they should receive. They will usually take into account the member’s expression of wishes, but they make the final decision. For Inheritance Tax purposes, the benefit is treated as belonging to the beneficiary once that decision has been made.

The personal representatives of the estate will be responsible for reporting and paying any Inheritance Tax due on these pension benefits. Once a pension benefit has been allocated to a beneficiary, that beneficiary can also become legally responsible for the tax relating to that benefit.

Personal representatives should make reasonable efforts to find any pension schemes that may pay death benefits, just as they would for other estate assets. In practice, this may mean checking papers, financial records and bank statements, and speaking to family members, beneficiaries, advisers and business contacts. They should contact the pension providers or insurers to report the death and ask for the information they need. Even if a pension provider contacts them first, they will still need to obtain the relevant details.

If a pension scheme is only discovered later, the personal representatives must still contact the scheme administrator to get a date-of-death value and details of the beneficiary. If they have already submitted the Inheritance Tax paperwork, they will need to correct it.

Personal representatives may be released from liability for tax on pensions they did not discover, if they have obtained clearance from HMRC. However, the pension beneficiary may still be responsible for any tax due on a pension that is found later.

Personal representatives should only apply for a certificate of discharge once they believe they have reported all the assets, including pensions, and settled any Inheritance Tax due. Once the certificate has been issued, it remains effective without any time limit.

Before applying for a certificate of discharge, the personal representatives will need to show that they have made their best efforts to find all of the deceased person’s pension arrangements.

If further pension benefits are discovered after the certificate of discharge has been issued, the personal representatives must still report them. If this changes how the nil rate band is shared across the estate, the personal representatives may still have to pay extra tax on the rest of the estate. However, they will not remain liable for the Inheritance Tax due on the newly discovered pension benefit itself.

The point about the nil rate band changing is important because it can alter the estate’s tax-free allowance after the estate has already been distributed. This may mean personal representatives, especially those who are not residuary beneficiaries, should more often seek indemnities from beneficiaries against future Inheritance Tax liabilities of this kind and consider how effective those indemnities would be if they later need to be enforced.