What is the Pension Inheritance Tax Calculator 2027?
The Pension Inheritance Tax Calculator 2027 helps you understand how unused pension wealth may be treated for Inheritance Tax from 6 April 2027.
It compares today’s position with the 2027 rules, where most unused pension funds and pension death benefits are expected to be included in the estate for Inheritance Tax purposes. The calculator also separates this from the different issue of pension income tax when beneficiaries withdraw inherited pension money.
How the Calculator Works?
Enter your home value, pension pot, ISAs, cash, other assets, debts, family position and pension death scenario.
The calculator then estimates how your estate may look under today’s rules and under the April 2027 pension IHT rules. It shows the possible extra Inheritance Tax from including unused pension wealth in the estate, then separately illustrates whether beneficiaries could face pension income tax when taking inherited pension money.
Step 1: Enter Your Estate and Pension Details
Add your salary, existing annual sacrifice, age, target retirement age, current pension pot, planned retirement spending, withdrawal rate, and assumed investment return.
Step 2: Add Family and Allowance Details
Include whether you are married or in a civil partnership, whether unused nil-rate bands may transfer, whether your home passes to direct descendants, and whether any gifts were made in the last seven years.
Step 3: Compare Today With April 2027
Review the estimated IHT position under current rules and under the 2027 pension rules, then check the separate pension income tax illustration for beneficiaries.
Disclaimer: This calculator is an educational illustration only and is not financial, legal or tax advice. It uses simplified assumptions for Inheritance Tax, pension growth, pension withdrawals, gifts and beneficiary taxation. It does not model defined benefit pensions in detail, trusts, business relief, agricultural relief, non-UK pensions, annuities, double-taxation relief, or full spouse estate planning. Seek regulated financial, legal or tax advice before making estate planning decisions.
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How the 2027 pension IHT change could affect different families
The 2027 pension inheritance change is confusing because it can involve two separate taxes. First, unused pension wealth may be counted inside the estate for Inheritance Tax. Second, beneficiaries may face pension income tax when they withdraw inherited pension money, especially if death happens at age 75 or over.
David, with a large pension and family home
Age 68 • Scenario age 82 • Home £480,000 • Pension £750,000
David has built a large pension and assumed it would sit outside his estate. He owns a family home, has ISAs and cash, and wants to understand how different the picture may look if death happens after the April 2027 pension IHT change.
- He includes £180,000 of ISAs and cash, £80,000 of other assets and £90,000 of debts.
- His pension is projected to around £793,000 at the scenario age.
- The calculator separates estate-level IHT from pension income tax for beneficiaries.
What David does next
David uses the result to see why pension IHT and pension income tax should not be bundled together. The calculator does not tell him to draw, gift or spend pension money, but it gives him a clearer estate figure to discuss with a solicitor, tax specialist or regulated adviser.
Helen and Martin, checking the spouse position
Ages 70 and 69 • Married • Home £650,000 • Combined pensions £900,000
Helen and Martin want to understand whether the 2027 change affects them immediately on first death, or whether the bigger issue may be the estate position after the second death. They are also unsure how transferable nil-rate bands and the family home allowance fit in.
- They test a first-death-to-spouse scenario using the spouse exemption.
- They include the residence nil-rate band because the home is intended to pass to children.
- They use the results to see why second-death planning may need separate advice.
What Helen and Martin do next
They use the calculator to understand the broad mechanics, not to complete their estate plan. The result gives them a prompt to review wills, beneficiary nominations and second-death planning with professional advice before making any pension decisions.
Sophie, inheriting a pension after age 75
Beneficiary scenario • Inherited pension £400,000 • Marginal tax rate 40%
Sophie is trying to understand what happens if she inherits pension money from someone who dies after age 75. She has heard the pension could face Inheritance Tax from 2027 and also income tax when she withdraws it.
- She compares inherited drawdown with taking a full lump sum.
- She checks the pension income tax illustration separately from estate IHT.
- She sees why taking all the money at once can create a different result from spreading withdrawals.
What Sophie does next
Sophie uses the result to separate the two tax layers. The calculator does not tell her how to withdraw the inherited pension, but it shows why beneficiaries may need tax advice before choosing between a lump sum and drawdown.
What is the Pension Inheritance Tax Calculator 2027?
The Pension Inheritance Tax Calculator 2027 helps you compare how unused pension wealth may be treated for Inheritance Tax today and from 6 April 2027. It also shows pension income tax separately, so families can see the difference between estate tax and tax paid when beneficiaries withdraw inherited pension money.
What is changing to pension inheritance tax in 2027?
From 6 April 2027, most unused pension funds and pension death benefits are due to be included in the value of a deceased person’s estate for Inheritance Tax purposes. This is a major change because many pensions currently sit outside the estate for IHT.
Does this mean all inherited pension money will be taxed twice?
Not automatically. The calculator separates two different taxes.
Inheritance Tax may apply to the estate, including unused pension wealth from 6 April 2027. Pension income tax is a separate issue and usually depends on the age at death and how beneficiaries take the inherited pension.
Is pension IHT the same as pension income tax?
No. Inheritance Tax is an estate tax, usually calculated on the estate above available nil-rate bands. Pension income tax is different and may apply when a beneficiary withdraws inherited pension money, especially where the original pension holder died aged 75 or over.
Why does age 75 matter?
Age 75 is mainly important for pension income tax, not the 2027 IHT change.
If death happens before age 75, inherited pension withdrawals are often income-tax-free for beneficiaries. If death happens at age 75 or over, inherited pension withdrawals are usually taxed as the beneficiary’s income. From 6 April 2027, unused pension wealth may also be included in the estate for IHT, regardless of whether death happens before or after 75.
Does the calculator show today’s rules and 2027 rules?
Yes. It compares the estimated Inheritance Tax position under current treatment with the expected April 2027 treatment, where unused pension wealth may be included in the estate.
What does “pension in scope” mean?
“Pension in scope” means the part of the unused pension pot that may be counted as part of the estate for Inheritance Tax from 6 April 2027.
Does the calculator include death-in-service benefits?
The calculator allows death-in-service benefits to be treated separately. HMRC’s technical note indicates that death-in-service benefits paid from registered pension schemes are excluded from the new pension IHT treatment.
How is Inheritance Tax calculated?
The calculator uses a simplified model. It applies available nil-rate bands, residence nil-rate bands where relevant, debts, gifts and a 40% IHT rate on the taxable estate.
What is the nil-rate band?
The nil-rate band is the amount of an estate that can usually pass before Inheritance Tax is charged. The calculator uses £325,000 per person and allows for transferable nil-rate bands where relevant.
What is the residence nil-rate band?
The residence nil-rate band can apply where a qualifying home passes to direct descendants. The calculator uses £175,000 per person and includes a simplified taper where the estate is above £2 million.
Does being married or in a civil partnership change the result?
Yes. Assets passing to a spouse or civil partner may be exempt from IHT on first death. Unused allowances may also be transferable, which can affect the position on second death.
Does the calculator model first death and second death fully?
No. It includes simplified spouse exemption and transferable allowance logic, but it does not replace full spouse estate planning. Second-death planning can be complex and should be reviewed with a professional adviser.
Does the calculator include gifts?
Yes. You can include gifts made in the last seven years and the calculator applies a simplified tapering approach. It does not model every gifting exemption or complex trust arrangement.
Should I draw my pension before 2027?
The calculator does not tell you whether to draw pension money, gift assets, spend more or change your estate plan.
Drawing pension money before 2027 could reduce the pension left at death, but it may also create income tax, investment, care, cashflow and estate planning consequences. The calculator is designed to show possible trade-offs, not recommend a strategy.
Could drawing more pension reduce Inheritance Tax?
It could reduce the pension pot left at death, which may reduce the amount brought into the estate from 2027. But withdrawn pension money may become cash, investments or spending, and those choices can create different tax outcomes.
What happens if beneficiaries take the inherited pension as a lump sum?
The calculator can illustrate a full lump sum withdrawal for pension income tax purposes. If death is at age 75 or over, a lump sum may create a large income tax charge for the beneficiary. This is separate from any estate-level Inheritance Tax.
What happens if beneficiaries use inherited drawdown?
Inherited drawdown may spread withdrawals over time. Where death is at age 75 or over, withdrawals are usually taxed as the beneficiary’s income in the years they take money out. The calculator provides a simplified illustration of this.
Does the calculator include defined benefit pensions?
No. It is mainly designed for unused pension pots, such as defined contribution pensions. Defined benefit pensions, spouse pensions and continuing annuities can work differently.
Does it include trusts?
No. Trusts are not modelled. If trusts are part of your estate planning, you should get specialist advice.
Does it include business or agricultural relief?
No. Business relief and agricultural relief are not modelled.
Does it include non-UK pensions?
No. The calculator is built for UK pension and estate planning illustrations.
Is this financial or tax advice?
No. It is an educational calculator only. The pension IHT reform is complex, and estate planning decisions should be checked with a regulated adviser, solicitor or tax specialist.
Can I export my results?
Yes. The calculator includes a CSV export so you can save your scenario and review the figures later.
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Certified Money First Aider®
These calculators are built by a Certified Money First Aider to help you think more clearly about money and time. Money First Aid® is about practical, non-judgemental support for financial wellbeing. The calculators can certainly help you make informed decisions, but they are not regulated financial advice.
