Could the April 2027 Changes Leave Your Family with an Unexpected Inheritance Tax Bill?

From April 2027, changes to Inheritance Tax rules could affect thousands of people approaching retirement. If you have a pension, property and savings, these changes could significantly increase the amount of tax your estate pays when you die.

In this article, we explain what is changing, who could be affected, and the steps you can take now to help protect your family’s inheritance.

What is changing?

From 6 April 2027, most unused pension funds are expected to be included within your estate when calculating Inheritance Tax.

Previously, pension savings generally sat outside your estate for IHT purposes, making them an effective vehicle for passing wealth to beneficiaries. Under the new rules, the value of your pension could increase the size of your estate, potentially pushing it above the available tax-free allowances.

While not everyone will be affected, those who have built substantial pension savings alongside property and other investments may find themselves in a very different position.

Why this matters for retirees

For many people in their late 50s, 60s and beyond, retirement planning isn’t just about generating enough income to enjoy life. It’s also about ensuring that the wealth you’ve worked hard to build is passed on as efficiently as possible.

These changes mean that pension planning and estate planning can no longer be treated as separate conversations.

Questions worth considering include:

• Should you draw more from your pension during retirement?
• Would gifting assets during your lifetime make sense?
• Is your Will still appropriate?
• Are your beneficiaries correctly nominated?
• Could your retirement income strategy be improved to reduce future tax?

The right answer will be different for every family, which is why reviewing your plans is so important.

Don’t wait until 2027

Although these changes don’t take effect until April 2027, effective planning often takes time.

Reviewing your financial position now gives you the opportunity to consider your options carefully rather than making decisions under pressure closer to the deadline.

For some people, the changes may have little or no impact. For others, a few well-planned adjustments today could significantly reduce the tax paid by future generations.

The bottom line

The upcoming pension and Inheritance Tax changes represent one of the biggest shifts in estate planning for many years. If you’ve spent decades building your pension, it’s worth understanding how these new rules could affect your family’s financial future.

A regular review of your retirement and estate planning can help ensure your wealth continues to work as hard for your loved ones as it has for you.

Disclaimer: The above information is for educational purposes and is not a personal recommendation or investment advice. Content is accurate at the time of writing. Tax limits may change in future. Capital at risk. Wise Investment is authorised and regulated by the Financial Conduct Authority (FCA 230553). Wise Investment is not authorised to provide advice on defined benefit pension transfers.