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2d ago

Average Homeowner Faces £82,000 Inheritance Tax Hit Under UK Plan to Tax Pensions From 2027

Counting unspent pensions in estates from April 2027 is projected to raise about £1.5bn a year, with tighter lifetime gifting rules under review.

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House values in London have helped to push the average inheritance tax bill in the capital up to £300,000
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Britain's Chancellor of the Exchequer Rachel Reeves (Oliver McVeigh/Pool via Reuters)

Overview

  • From April 2027, unspent private pension pots will be included in estate valuations for inheritance tax at up to 40%, applying even if someone dies before the minimum pension access age.
  • Quilter estimates a working‑age single homeowner in England with an average‑priced home (£290,395) and a £415,000 pension would face about £82,158 in inheritance tax, rising to roughly £192,254 for a sole London homeowner with the same pension.
  • Cohabiting couples are more exposed because they do not benefit from spousal exemptions or transferable allowances that let married partners pass on up to £1m tax‑free.
  • HMRC data show London estates paid £1.53bn in inheritance tax in 2022–23—triple the total from Scotland, Wales and Northern Ireland combined—driven by higher property values and frozen tax‑free thresholds.
  • The Treasury is considering further reforms for the autumn Budget, including a possible lifetime cap on tax‑free gifts and changes to taper rules, as industry groups push for carve‑outs such as exemptions for smaller pension pots.