Bereaved families will face increased financial and administrative pressure following the government’s decision to include pensions in inheritance tax (IHT) calculations from April 2027, despite widespread opposition from both the public and the pensions industry.
Under the new rules, pension pots will be treated as part of an individual’s estate when calculating inheritance tax liabilities. The Treasury expects the policy to raise £1.46 billion per year by 2029–30, with 10,500 estates set to pay inheritance tax as a result, and a further 38,500 estates facing higher tax bills, according to HM Revenue & Customs (HMRC).
The move has been described by critics as the Labour government’s most unpopular tax change to date. A recent AJ Bell poll of 2,050 adults found that 44 per cent opposed the change, with just 21 per cent in support.
Renny Biggins, head of retirement at The Investing and Savings Alliance, which represents over 270 financial services firms, said the decision was deeply disappointing.
“Despite significant pushback from the industry, pensions will now form part of inheritance tax calculations,” he said.
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