The UK’s inheritance tax (IHT) landscape is undergoing one of its most significant transformations in decades. With rule changes already underway in April 2026 and a major overhaul to pension taxation arriving in April 2027, individuals and families face growing complexity. For many, particularly those with multiple pension pots, the risk of confusion—and unexpected tax bills—is rising fast.
A shifting IHT landscape
Inheritance tax has long been criticised as a “stealth tax”, and recent policy decisions reinforce that view. While the headline rate remains at 40%, thresholds have been frozen until at least 2031, meaning more estates are being pulled into the tax net through fiscal drag.
Alongside this, April 2026 introduces changes such as caps on agricultural and business reliefs, tightening previously generous exemptions.
However, the most dramatic change is still to come.
The April 2027 pension shock
From 6 April 2027, most unused pension funds will be included in a person’s estate for inheritance tax purposes.
This represents a fundamental shift. Historically, pensions have sat outside the estate, making them one of the most tax-efficient ways to pass on wealth. That advantage is now being significantly eroded.
Mike Bonner-Davies, Senior Private Wealth Adviser & Pensions Specialist at PwC says: “The impact of these rule changes, which will bring pensions into the scope of inheritance tax from April 2027, will be significant and widespread. This is something that individuals will need to consider carefully as part of their overall wealth strategy and succession planning.
There are options available. In advance of the start date of the new rules, we are already seeing pension scheme members being proactive and holistically reassessing their position. Using pensions to support charitable giving in lifetime and/or on death can be a beneficial option.”
Under the new regime, any unused pension savings—whether held in a workplace scheme or private arrangement—could attract IHT at up to 40% if the total estate exceeds the nil-rate band.
Government estimates suggest this could increase the average IHT bill by around £34,000 when pensions are included.
Why multiple pension pots create complications
Many UK savers accumulate several pension pots over their working lives, often through auto-enrolment, job changes, or a mix of personal and workplace schemes. While this has traditionally been manageable, the new IHT rules could turn this into an administrative headache.
Each pension pot may:
- Have different rules governing death benefits
- Sit with different providers
- Require separate valuations and reporting
From April 2027, personal representatives (executors) will be responsible for reporting and paying IHT on unused pension funds.
This introduces a significant burden. Executors will need to gather accurate valuations across multiple schemes, potentially liaise with several administrators, and ensure tax is paid within strict deadlines. Delays or errors could lead to penalties or interest charges.
Critics have already warned of the practical challenges. Industry voices have argued that the proposals may require “major changes” to ensure they work fairly and effectively.
The risk of “double taxation”
Another concern is the potential layering of taxes. In some cases, pension funds passed to beneficiaries could face inheritance tax first and then income tax when withdrawn, depending on the beneficiary’s circumstances.
This dual exposure further reduces the tax efficiency pensions once offered and complicates financial planning decisions. As a result, some savers are already reconsidering how they use their pensions, including drawing down funds earlier or restructuring their estate planning strategies.
Behavioural changes already underway
Evidence suggests that these reforms are already influencing behaviour. Some individuals are accelerating pension withdrawals or exploring alternative strategies such as gifting or annuities to mitigate future tax exposure.
This highlights a key issue: the rules are not just complex—they are changing how people approach retirement and inheritance planning altogether.
Planning ahead: why advice matters
With multiple pension pots, frozen thresholds, and new reporting obligations, the margin for error is narrowing. What was once a relatively straightforward estate planning strategy can now involve intricate coordination between pensions, wills, and tax rules.
Professional advice is therefore becoming increasingly important. Seeking guidance from firms such as CMA Accountancy can help individuals:
- Consolidate or review pension arrangements
- Understand how different pots will be treated under IHT
- Structure withdrawals or gifting strategies efficiently
- Ensure compliance with evolving tax rules
Crucially, expert advice can help preserve the tax efficiency of pensions wherever possible, even within the new regulatory framework.
The upcoming inheritance tax changes mark a turning point in UK financial planning. By bringing pensions into the IHT net from April 2027, the government is dismantling a long-standing tax advantage and introducing new layers of complexity.
For those with multiple pension pots, the risks are particularly acute. Administrative burdens, potential tax overlaps, and evolving rules create a perfect storm of uncertainty.
Early planning—and the right professional support—will be essential. Without it, families could face not only higher tax bills but also unnecessary stress at an already difficult time.