November 6, 2026
reading time: 4 min
UK Autumn Budget 2026: Pensions, Inheritance Tax and Your Estate
November 6, 2026
reading time: 4 min
UK Autumn Budget 2026: Pensions, Inheritance Tax and Your Estate
November 6, 2026
reading time: 4 min
UK Autumn Budget 2026: Pensions, Inheritance Tax and Your Estate
UK Autumn Budget 2026: What It Means for Inheritance Tax and Your Estate Planning
The Chancellor, John Healey, delivered his first Autumn Budget on 28 October 2026. For most families the headline is reassuring: inheritance tax (IHT) rates and allowances have not changed. However, the Budget introduced several smaller changes. It also brings us closer to the most significant reform in years: pensions coming into the IHT net from April 2027.
Did inheritance tax change in the Autumn Budget 2026?
The core rules remain the same. IHT is still charged at 40% on estates above the available allowances, which stay frozen until 5 April 2031:
- the nil rate band of £325,000, unchanged since 2009;
- the residence nil rate band of £175,000, available when your home passes to children or grandchildren;
- the £2 million taper threshold, above which the residence nil rate band is gradually withdrawn.
Because house prices and savings continue to grow while these thresholds stand still, more estates are drawn into IHT each year.
What is new this year?
Trusts and debts. The government is tightening the rules on when debts linked to trust property can reduce the IHT bill. This applies to deaths and other chargeable events on or after 28 October 2026. If you have a trust that holds borrowing, it is worth having it reviewed.
Pensions and IHT administration. Executors will be able to ask a pension scheme to pay IHT directly to HMRC at an earlier stage than previously planned. This should help families who would otherwise struggle to pay the tax before they can access the estate.
Gifts to charity. If you leave 10% or more of your estate to charity, the IHT rate falls from 40% to 36%. From 6 April 2027, executors will be able to choose how pension funds are treated in that calculation, which may help more estates qualify for the lower rate.
Pension death benefits. The rule that made some death benefits taxable if they were paid more than two years after a member’s passing has been removed.
Pensions come into IHT from 6 April 2027
This change was announced in earlier Budgets and is now only a few months away. From 6 April 2027, most unused pension funds and pension death benefits will count as part of your estate for IHT. Death-in-service benefits remain excluded.
For example, Margaret is a widow aged 82. Her home, worth £450,000, will pass to her children. She also has £350,000 in savings and £300,000 in a private pension. Her late husband’s allowances were unused, so her estate benefits from two nil rate bands and two residence nil rate bands, £1 million in total.
- If Margaret passes away before 6 April 2027, her taxable estate is £800,000 and there is no IHT to pay.
- If she passes away after that date, her pension is added and her estate becomes £1.1 million. The IHT bill is £40,000.
Because Margaret is over 75, her children may also pay income tax when they draw money from the inherited pension. Many people saved into their pensions precisely because they used to pass on free of IHT, so now is a sensible time to review your plans.
Agricultural and business property
Since 6 April 2026, 100% relief applies to the first £2.5 million of combined agricultural and business property. Relief of 50% applies above that amount. Any unused allowance can be transferred to a surviving spouse or civil partner. Where IHT is payable on these assets, it can be paid in interest-free instalments over ten years. This Budget made no further changes.
Other changes worth knowing
- From April 2027, the income tax rates on savings interest rise to 24%, 44% and 49%.
- A new Pension Tax Allowance means that people whose income is no more than the full new State Pension will not start paying income tax because of State Pension increases during this Parliament.
- Capital Gains Tax rates and the £3,000 annual exempt amount are unchanged.
What should you do now?
- Review your Will. This is especially important if it was written before April 2026 or before the pension changes were announced.
- Check your pension nomination forms. These tell your scheme who should receive your pension, and many people have not updated them for years.
- Consider lifetime gifts. Gifts are generally free of IHT if you survive seven years, and regular gifts made from surplus income can be exempt immediately. You can read more in our guide Can You Gift Your House to Your Children in the UK?
- Make sure your home qualifies for the residence nil rate band. This depends on who inherits it and how your Will is worded.
- Put Lasting Powers of Attorney in place. These let someone you trust manage your affairs if you are unable to.
Frequently asked questions
What changes are coming for pensioners?
From April 2027, most unused pension funds will count towards your estate for inheritance tax. In the same month, a new Pension Tax Allowance begins. It means that people whose income is no more than the full new State Pension will not start paying income tax because of State Pension increases. The tax rates on savings interest also rise from April 2027.
Will my pension be subject to inheritance tax?
From 6 April 2027, most unused defined contribution pensions and pension death benefits will form part of your estate. Death-in-service benefits are excluded. Pensions left to a spouse or civil partner remain free of inheritance tax, as with other assets.
How much can a pensioner have in income before paying tax?
The personal allowance remains £12,570. Under the new Pension Tax Allowance, if your total income is no more than the full new State Pension (£13,036.40 in 2027/28), you will not pay income tax on it.
Should I take my tax-free lump sum before April 2027?
Not necessarily. Money you withdraw and keep still forms part of your estate, so taking a lump sum does not by itself reduce inheritance tax. It may help if the money is gifted or spent, but there can be other consequences. We recommend speaking to a regulated financial adviser before making pension decisions. We can then make sure your Will and wider Estate Planning reflect your choices.
How can Westminster Law help?
Our Partners can review your Will, pension arrangements and wider Estate Planning in light of these changes, explaining everything in plain English. Learn more about our Wills and Estate Planning services.
If you are over 60, we can prepare your Will for just £95*. Home visits are included in our fees.
Contact Westminster Law for professional advice. We have offices across England and Wales, including Milton Keynes, Blackburn, Dereham, Nottingham, Bedford, and many other locations.
*All of our prices include VAT.
**These prices are only applicable to instructions taken during the first meeting.
This article is for general information only and reflects the Autumn Budget announcements of 28 October 2026. Some measures are subject to legislation. Please seek advice on your own circumstances.
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