On 6 April 2027, your pension goes back into your estate for inheritance tax — for the first time since 2015. For a household with a £812k SIPP, that's the difference between a £21k tax bill and a £345k one. We don't sell the answer. We show you the picture, in plain English, with the window before April 2027 still open.
Right now, your pension passes to your family free of inheritance tax if you die before drawing it down. From 6 April 2027, that stops — pensions go back into your estate, and the 40% rate above your allowances kicks in. The good news: you have time between now and April 2027 to review your setup and bring the number down legally.
Since 2015, defined-contribution pensions — SIPPs, personal pensions, AVCs, SSAS — have been excluded from your inheritance-tax estate. Die before drawing them, and they pass to your nominated beneficiaries with no IHT.
HMRC confirmed in the October 2024 Autumn Budget that undrawn pension wealth on death is added to your estate for IHT — taxed at 40% above your Nil-Rate Band (£325k) and Residence Nil-Rate Band (£175k) where they apply.
By HMRC's own modelling, roughly 1.6 million UK households with £500k+ in pension wealth gain a six-figure potential tax bill that wasn't there a year ago. Most haven't done the maths yet. Four years sounds like a lot. It isn't.
The change hits hardest where pension wealth is largest and estate headroom is smallest. The HMRC numbers below come from the October 2024 Budget Red Book and the Office for Budget Responsibility — checkable, not invented.
The cohort with material IHT exposure under the new rules.
HMRC · Policy costing · Oct 2024Per year, in the first three years. The cost of inaction, across UK households.
HMRC · Budget Red Book · Oct 2024Per year. Estates that wouldn't have owed IHT before — now will.
HMRC · OBR projectionsA six-figure tax bill landing on inheritors who didn't have one in the previous tax year.
HMRC · derived from costingThe UK tax system has a vocabulary built to keep advisers in business. Here are the words that come up in every April 2027 conversation, in the order you'll meet them, in English you'd use over a coffee.
The bill HMRC sends on what you leave behind. 40% on everything above your tax-free allowances. Spouses don't pay it on what they inherit from each other — children do.
The first £325,000 of your estate that passes tax-free. Unchanged since 2009. Frozen until 2030 — meaning inflation is quietly making it smaller in real terms every year.
An extra £175,000 on top of the NRB — but only if you leave your main home to your children, grandchildren, or step-children. Tapers away on estates above £2m.
The kind where you build a pot. SIPPs, personal pensions, most workplace pensions, AVCs, SSAS. This is what April 2027 is about.
The kind where you're promised an income for life. NHS, teachers, armed forces, civil service, most pre-2000 corporate schemes. April 2027 hits these differently — survivor's pensions are income-taxed, not estate-taxed.
A gift you give while you're alive. If you survive seven years after giving it, it's completely out of your estate. If you die in years 1–3, the full IHT applies. Years 4–7 taper down.
Trading-business assets — shares in your own company, qualifying AIM stocks — can pass IHT-free after you've held them for 2 years. Still works after April 2027. One of the few unchanged levers.
Pulling cash out of your DC pension while you're alive. You can only start from the minimum pension age — currently 55, rising to 57 from 6 April 2028. The first 25% of each withdrawal is tax-free (up to a £268,275 lifetime limit); the rest is taxed as income at your marginal rate.
If you die after age 75 with an undrawn DC pension, your beneficiaries already pay income tax on the drawdowns. From April 2027, IHT applies first, then income tax on what's left — the same pound is taxed twice.
Leave 10%+ of your estate to charity in your will, and the IHT rate on everything else drops from 40% to 36%. Useful for larger estates; trivial for smaller ones.
This is a preview of the Sonuswealth model — not a calculator. Drag the two numbers and watch your picture move: the bill, the headroom, the daily cost of doing nothing. The real model handles your spouse, your DB pensions, your gifts, your charity intent, and the rest of your estate. This snippet shows the bones.
Two inputs. Live update. Same anchors the full Sonuswealth model uses — Net Worth · Wealth Score · Risk · Cost of Inaction.
What this preview assumes: single person, RNRB applies fully (home left to direct descendants), no lifetime gifts, all pension wealth undrawn. Couples, complex estates, and post-75 cases work differently — the full model handles them. Information & guidance only — not regulated advice.
Six household shapes. Same single-person assumptions. The point isn't that bigger pensions are worse — it's that the conversation you need to have with your accountant or adviser just got urgent.
| Pension | Other estate | Total estate | IHT today | IHT Apr 2027 | Change |
|---|---|---|---|---|---|
| £250,000 | £500,000 | £750,000 | £0 | £100,000 | +£100,000 |
| £500,000 | £500,000 | £1,000,000 | £0 | £200,000 | +£200,000 |
| £500,000 | £800,000 | £1,300,000 | £120,000 | £320,000 | +£200,000 |
| £800,000 | £600,000 | £1,400,000 | £40,000 | £360,000 | +£320,000 |
| £1,200,000 | £800,000 | £2,000,000 | £200,000 | £680,000 | +£480,000 |
| £2,000,000 | £1,000,000 | £3,000,000 | £600,000 | £1,400,000 | +£800,000 |
Indicative figures for a single person. RNRB applied fully (home to direct descendants), no PETs, all pension undrawn. Couples and complex estates work differently — Sonuswealth handles the full case.
Five composite households. The numbers and rules are real and current to May 2026; names are illustrative. Each one comes with the lever Sonuswealth would surface first.
Sonu's first lever: a four-year drawdown plan moving £580k out of the SIPP into ISAs, gifts inside the seven-year window, and a 10% charity allocation. Modelled exposure drops to £28k. Same lifestyle. Paul's accountant signed off in one meeting.
The detail most articles miss: NHS DB pensions stay outside the IHT change because they pay a survivor's income, not a capital sum. So Niamh's "real" pension is fine — but the SIPP she opened in her 40s isn't. Sonu's lever: structured drawdown of the SIPP into JISAs for her two grandchildren, retiring with the NHS pension only. £72k → £0.
Tony's BPR-qualifying shares stay IHT-free after April 2027 — that's one of the few unchanged levers. But the SIPP and SSAS aren't covered. Sonu modelled three options: heavier salary draw (kept inside the BPR envelope), increased ISA + JISA wrapping, and a trust review. Decision deferred to the next accountant meeting, but the numbers are on the table.
The cruellest case. Walter's beneficiaries already owed income tax on the drawdown under post-75 rules. From April 2027, IHT applies first, then income tax on what's left — the same pound taxed twice. Sonu's lever: accelerated drawdown into family JISAs and a deed-of-variation strategy. Estate exposure halved.
The UK-NRI case nobody else models. As UK tax residents, Raj & Priya's worldwide assets are in scope for UK IHT — including the Bangalore flat and Indian NPS. The UK-India Double Taxation Avoidance Agreement (DTAA) prevents the same asset being taxed twice, but it doesn't make the UK side disappear. Sonu's lever: spousal pension transfer to Priya (full nil-rate band stacking), drawdown of Raj's SIPP into a UK ISA + tactical gifting, and a UK-India will alignment. Exposure drops to £52k. The only UK consumer tool that handles this without bolting it on.
Type a question — your numbers, your worry, your specific case. Sonu replies with the rule, the maths, and the lever — no jargon, no recommendation. For a real recommendation, see an authorised adviser. This is the information Sonu would give a friend.
What Sonu can and can't do: Sonu explains UK rules in plain English using your stated situation. Sonu does not tell you whether to drawdown, gift, set up a trust, or change advisers — those are regulated activities. For a recommendation, see an authorised adviser. Information & guidance only — not regulated advice.
We don't tell you what to pull — that's a regulated activity. We show you what each lever does in pounds, where the seven-year clock starts, and which combinations interact. The decision is yours; the conversation is one to have with your adviser or accountant.
Withdrawing from your pension moves wealth out of the soon-to-be-taxable pot and into ISAs, taxable accounts, or gifting headroom. Trade-off: today's income tax versus future IHT. Sonuswealth runs the maths against your tax band.
Gifts you make more than seven years before you die drop out of the estate completely. Gifts in years 1–3 are fully taxed. Years 4–7 taper down. Sonuswealth tracks each gift against its own clock.
Leave at least 10% of the estate to charity and the rate on the rest drops from 40% to 36%. Material for larger estates. Trivial for smaller ones. Modelled either way.
Married couples and civil partners can transfer unused nil-rate bands. Properly structured, two people can pass £1M to the next generation IHT-free (£325k × 2 + £175k × 2). Always-on, always modelled.
Trading-company shares, qualifying AIM stocks, qualifying business interests — these stay IHT-free after April 2027. Specialised. Risk-laden. Worth modelling carefully; we flag the qualifying ones and the trap doors.
Discretionary trusts, life cover written into trust, bare trusts — each behaves differently for IHT. "Is your life insurance in trust" is now an urgent question, not a polite one. We flag it on Risk & Resilience.
6 April 2027 — the start of the 2027/28 UK tax year. Confirmed in the October 2024 Autumn Budget; legislation in Finance Bill 2025-26.
All undrawn UK defined-contribution pensions — SIPPs, personal pensions, AVCs, master trusts, SSAS. Defined-benefit pensions (NHS, teachers, armed forces) work differently — most pay a survivor's income, which is income-taxed, not estate-taxed.
The new rules apply to the undrawn portion of your pension. What you've already withdrawn sits in your estate as cash, ISA, or other assets — under the existing IHT rules. Sonuswealth tracks both halves.
Yes. Anything passing to a spouse or civil partner remains IHT-free — that exemption is older than the pension carve-out and isn't changing. The April 2027 change bites at the second death.
Pre-75 deaths: beneficiaries inherit DC pensions free of income tax. Post-75: beneficiaries pay income tax on drawdowns at their marginal rate. From April 2027, IHT applies first, then income tax on what's left — meaning the same pound is taxed twice for post-75 estates above the allowances.
Yes. The rules in force at the date of death apply. Estates settling before 6 April 2027 use the existing pension-excluded regime.
Plausible. UK tax rules change every Budget. Sonuswealth updates within days of each Budget, so your numbers reflect what's current — not what was true last year.
No. Sonuswealth is not FCA-authorised and we don't give regulated financial advice. We provide information and guidance — we show you the rules, the maths and the consequences in pounds. We never recommend whether to drawdown, gift or restructure. For a personal recommendation, speak to an FCA-authorised IFA.
£9/month for households, £4.50/month for NHS and public-sector workers. First month free. See pricing for the full picture.
Sonuswealth holds your whole household — pensions, estate, spouse, gifts, charity, BPR, trusts, Indian assets — and shows what April 2027 costs your family. Updated every Budget. Join the waitlist; Wave 1 opens H2 2026.